The footage, obtained by The Sun, reportedly shows the former EastEnders star smoking crack cocaine.
It was allegedly filmed two weeks ago at a flat in Bolton.
Speaking about the footage, a source told the newspaper that Paul Nicholls, 36, has 'fallen in with a bad crowd' and 'gone off the rails.'
“Paul has been trying to keep things clean,” the source reportedly said.
“But he has recently let himself slide and fallen off the wagon. He seems in a bad way.”
Paul, who found fame when he was 16-years-old as Joe Wicks in EastEnders, has been open about his past struggles.
Speaking about them in 2008, The Sun reported him as saying that he turned to drink and drugs after finding it difficult to cope with his newfound fame as a soap heartthrob.
He said at the time: "I was drinking a lot and taking drugs.
"I had lost control of my life.
"Everything span out of control. I had an appetite for craziness.”
According to reports, Paul - who also starred in the Bridget Jones Diary and more recently alongside Sheridan Smith in The C-Word - is now seeking help once again for his addiction.
The Sun have claimed that, following the release of the footage, Paul has entered the Bolton Royal Infirmary.