Kimi Raikkonen, the 2007 world champion whose Ferrari team are threatening to walk away at the end of the season in a standoff over the 2010 rules, joined the Briton on the front row in a sign of the Italian team's resurgence after a dismal start to the year.
Button's Brazilian Brawn GP team mate Rubens Barrichello qualified third on his 37th birthday with Red Bull's German Sebastian Vettel alongside.
Ferrari's Brazilian Felipe Massa starts fifth with Germany's Nico Rosberg next to him in a Williams.
"Today was a really tough fight," said Button of a seventh career pole position secured with a flying lap right at the end of qualifying. "It was manic, as it always is in Monaco, It's good to have come away with the pole, I was right on the edge," added the Monaco resident.
"I think Jenson is getting into the habit of saving the best for last," team boss Ross Brawn told BBC television. "He knew that was the lap where he had to produce and he's just driving exceptionally well at the moment."
While one Briton celebrated, another had a nightmare afternoon.
Defending champion Lewis Hamilton effectively wrecked his chances of winning for the second year in a row when he smashed his McLaren into the barriers after just 11 minutes.
The 24-year-old lost the back end of the car on the entrance to the Mirabeau hairpin and hit the tyre wall in the first part of qualifying. With debris on the track, the session was halted briefly while Hamilton, who qualified 16th, made his way back to the garages.
Dream start for Force India
Force India achieved its best start of the season with Giancarlo Fisichella booking the 13th slot on the grid, two positions ahead of his German teammate Adrian Sutil.
It was a dream-come-true for the Silverstone-based outfit with both the cars gatecrashing into the second qualifying session (Q2), something they have not achieved so far.
Sutil was flying in seventh while Fisichella quickly moved up to ninth. Fisichella had a couple of times disallowed after the Italian had cut a corner. To his credit, Fisichella not only managed to sneak into Q2 as the last driver but also went on to post a timing of 1:16.146 to eclipse Sutil (1:16.545) to ensure his best start of the season.
Monaco GP starting grid
Driver Country Team
1. Jenson Button Britain Brawn-Mercedes
2. Kimi Raikkonen Finland Ferrari
3. Rubens Barrichello Brazil Brawn-Mercedes
4. Sebastian Vettel Germany RedBull-Renault
5. Felipe Massa Brazil Ferrari
6. Nico Rosberg Germany Williams-Toyota
7. Heikki Kovalainen Finland McLaren-Mercedes
8. Mark Webber Australia RedBull-Renault
9. Fernando Alonso Spain Renault
10. Kazuki Nakajima Japan Williams-Toyota
11. Sebastien Buemi Switzerland Toro Rosso-Ferrari
12. Nelson Piquet Brazil Renault
13. Giancarlo Fisichella Italy Force India
14. Sebastien Bourdais France Toro Rosso-Ferrari
15. Adrian Sutil Germany Force India
16. Lewis Hamilton Britain McLaren-Mercedes
17. Nick Heidfeld Germany BMW Sauber
18. Robert Kubica Poland BMW Sauber
19. Jarno Trulli Italy Toyota
20. Timo Glock Germany Toyota