Proposed Answer:
1. Immediate action: assign the problematic emloyee tasks that enable work in isolation and require little interaction with the rest of the team members.

2. Talk to the employee and set an agreed upon measurable behavior goals.

3. Send the employee to proper training (on company's expense of course)

4a. Coach the rest of the team about fair treatment of the problematic employee setting expectations from them.

4b. Gradually assign the employee tasks that require more interaction with the team

5. Assess if the employee's behavior improved or not. Discuss the assessment results with the employee.

6a. If there is noticeable improvement, encourage the employee to continue his improvements, and coach the team accordingly.

6b Else (no noticeable improvement), re-assign the problematic employee tasks that enable work in isolation and require little interaction with the rest of the team members. At the same time, nurture a replacement from within the company or find a replacement via a new hire.

I think this can be best viewed as formula:

(a) Is he commited to his work ?
(b) Is he happy with his commitment ?

Now:

1. If a=true and b=true -> check yourself!
are you sensitive enough to him and what he is going through ?

2. If a=true but b=false -> upgrade his salary.

3. If a=false but b=true -> promote him or add more responsibilites on him.

4. If a=false and b=false -> Release him so the rest of your team can be more commited and more happy with their commitments.

Few notes:
If your employee was (1) but turned into (3) - you are wrong he is at 4..
If your employee was (3) and became (2) - he is emotionally unbalanced.