Hilliard was on fire from distance and finished with a game-high 31 points while shooting 8/13 from 3-point range including the game winner.
Villanova (23-2, 10-2) was impressive from the field shooting 23/50 (46%) for the game including 12/26 (46.2%) from 3-point range.
The Bulldogs also shot well from the field making 21/51 (41.2%) including 7/17 (41.2%) from 3-point range. They also finished 16/19 (84.2%) from the free throw line.
Villanova led 27-22 at the break before Dunham rattled off 10 straight points to give Butler the lead early in the 2nd half.
It was a back and forth battle as the 2nd half wore on with each team exchanging the lead and led to the eventual conclusion with just seconds left.
Butler sophomore Andrew Chrabascz left the game early in the 2nd half with an apparent hand injury, but did return later. He will have x-rays on Sunday.
Trailing by two, Hilliard committed a double-dribble giving the ball to Butler. On the ensuing possession, Roosevelt Jones converted through contact to tie the game at 55-55.
Butler then left Hilliard open to double junior Ryan Arcidiacono and he converted the long distance shot.
The Bulldogs had one more opportunity. Austin Etherington threw a wonderful pass the length of the floor which was kicked out to freshman Kelan Martin for a wide-open look, which came up short and left of the rim.
Martin finished the game with 10 points and 4 rebounds.
It was a rough game for junior Roosevelt Jones who finished 2/11 from the field and had just 6 points. He was saddled with foul difficulties in the 1st half after picking up 2 personal fouls.
Butler will now hit the road on Monday night heading to Omaha to take on Creighton.
NOTES: There were just 29 fouls called in a physical game...Chrabascz finished with 8 points and 4 rebounds...senior Kameron Woods added 3 points and 12 rebounds...Butler won the rebounding battle 34-25 including a 12-7 advantage on the offensive glass.