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Adjust oven rack to middle position and heat oven to 250 degrees.
Place butter in Dutch oven and bake uncovered until all water evaporates and solids are golden brown, 2 ½ to 3 ½ hours.
Line fine-mesh strainer with triple layer of cheesecloth that overhangs edges and set over large bowl.
Let ghee cool slightly, then transfer to prepared strainer and let sit until all ghee is extracted; discard solids.
(Cooled ghee can be stored at room temperature for up to 3 months or refrigerated for up to 1 year.)