United went into the FA Cup third-round tie at the Etihad Stadium on a downer following back-to-back Premier League defeats, but appeared to be given a lift by the news of Scholes' return, which broke just an hour before kick-off.
Ferguson's men swept into a 3-0 lead by half-time and, as City tore into their opponents after half-time, Scholes was brought on to help stabilise the midfield and seal a thrilling 3-2 win.
"It was a smart move by the manager," former United midfielder Butt told MUTV. "It took all the attention off their home record and the bookmakers' odds and switched all the attention to Paul Scholes and Manchester United.
"It was a great little bit of psychology."
Having spent so many years playing alongside Scholes, who retired at the end of last season, Butt knows exactly what his old team-mate can add to United's quest for honours.
"You are not going to get a better player than Paul Scholes," he said. "He is a phenomenal player. He can do what no one else can do.
"He dictates play and keeps things simple. There is no one better at doing that.
"It is a massive boost for everyone at the club."
Wayne Rooney scored two of United's goals on Sunday and admitted that Scholes' inclusion in the matchday squad had come out of the blue even to the rest of the players.
"We just thought he was coming along to watch the game," Rooney said. "We saw him getting changed and someone asked him what he was doing, then we saw the number 22 shirt with Scholes on the back.
"That was a bit weird but it is great for us. He is a well-liked lad around the dressing room."
