Butia arenicola was collected by the Swiss physician and botanist
Émile Hassler in Paraguay, in sandy plains in the highlands of the
Cordillera de Altos in January 1898 – 1899. It was first formally described as
Cocos arenicola by
João Barbosa Rodrigues in 1903, using this specimen as a type.
Max Burret, working in Berlin, moved this taxon to
Butia in 1930. Meanwhile, in the United States, Frambach had taken to calling this taxon
Syagrus arenicola, although he did not formally move the species. Dahlgren validated this name in 1936. In 1970 Glassman, who had not travelled to the region to observe the plants
in situ, considered the species identifiable in most of the specimens labelled as such that he had examined, but in his entry about the taxon he presents a large amount of text expressing doubts that this dwarf taxon might merely be immature individuals of
Butia capitata (in which he included
B. odorata), as he theorized that perhaps certain characters which set this taxon apart, such as reduced pinnae (leaflet) width and size of the trunk and inflorescence, were in fact related to age of the specimen. Glassman further determined a group of specimens collected by
William Andrew Archer and Augusto Gehrt in 1936 in
Jaraguari, Mato Grosso do Sul, to be
S. aff.
arenicola. Glassman lastly also identified as
S. aff.
arenicola a specimen collected by
Amaro Macedo in 1950 at a locality likely to be Nova Ponte along the Rio Verde, in
Água Clara, Mato Grosso do Sul. and
Lorenzi et al. in the Arecaceae of the 2010 Flora Brasileira. Larry Noblick, a US palm expert, did not follow this interpretation, and was determining herbarium exxicata as
B. arenicola by 2007. Noblick re-examined at least one specimen which had been assigned to
B. paraguayensis and reassigned this to
B. arenicola: an 1882 collection by
Benjamin Balansa in
Valenzuela, Cordillera department, Paraguay, also collected earlier than Hassler's collection of the type. In 2009 Irene M. Gauto recognised this taxon as a distinct species, despite otherwise following Henderson
et al. in her work acquiring a Masters in Biology degree at the
University of Geneva. Soares in 2015 followed these later works in recognising this taxon as a valid, independent species. He, along with R. Pimenta, collected a specimen in 2012 in between the municipalities of
Água Clara and
Três Lagoas in
Mato Grosso do Sul, Brazil, which he identified as
B. arenicola. In 2015 he published a treatment of the entire genus
Butia in which he published his opinion on the matter, and this was followed in the Arecaceae section of the Lista de Espécies da Flora do Brasil published by Leitman
et al. in 2015. ==Description==