The cafe boss has been missing since his failed wedding to Mandy Salter last month and was last seen walking down the side of a motorway in his pyjamas and dressing gown.
Viewers have also seen him struggle with financial pressures and the aftermath of Ben Mitchell's killer secret in recent weeks.
The Daily Star now claims that Ian has been living rough in London after suffering a mental breakdown.
Actor Adam Woodyatt reportedly returned to the set of the BBC soap last week and has shocked co-stars with his new look.
A show insider is quoted as saying: "Ian is unrecognisable. He's dishevelled, has long hair and a long beard. He looks like a proper tramp.
"Viewers will discover that since he left he's been living rough on the streets of London and has even become friends with other beer-drinking vagrants. It's a shocking storyline.
"A lot of the cast and crew couldn't believe Adam's amazing transformation."
Sharon Rickman, played by Letitia Dean, will also return to Walford around the same time that Ian is discovered.
The source added: "Sharon and Ian grew up together and are like family. If anyone can help him it's her. He's hit rock bottom and is in a bad way. He needs someone as close as Sharon to help him through. He's a broken man.
"There's also killer Ben's confession, which will be filmed next month. Whether Ian gets strong enough to turn him in remains to be seen but there's going to be one hell of a fallout."
Watch Ian Beale's EastEnders character trail in the video below: