1850, American English, possibly an alteration of brother, or from British colloquial butty "companion" (1802), itself perhaps a variant of booty in booty fellow "confederate who shares plunder" (1520s). But butty, meaning "work-mate," also was a localized dialect word in England and Wales, attested since 18c., and long associated with coal miners. Short form bud is attested from 1851. Reduplicated form buddy-buddy (adj.) attested by 1952, American English.
Lenny Kent, a long-time fave here, is really in his element. ... After four weeks here he's got everyone in town saying, "Hiya, Buddy, Buddy" with a drawl simulating his. [Review of Ned Schuyler's 5 O'Clock Club, Miami Beach, Fla., Billboard, Nov. 12, 1949]
Buddy system attested from 1920.
1925, usually with up, from buddy (n.); perhaps originally U.S. underworld slang. Related: Buddied; buddying.