Wei Zexi, 21, had already been diagnosed as having a terminal soft tissue disease when his family found an experimental immunotherapy treatment at a Beijing hospital run by the armed police force via a Baidu search.
Wei spent more than CNY 200,000 ($30,000) on the therapy but it failed, he said in a posting on zhihu.com, a Chinese question-and-answer forum, in February.
He had borrowed money to cover his costs.
Wei accused the hospital of exaggerating the treatment's efficacy and accused Baidu of ranking medical information search results by the amount paid by advertisers, denouncing it as "evil" and warning other cancer patients "not to be cheated".
Baidu says it differentiates paid entries in its search results.
But amid mounting public anger, the Cyberspace Administration of China said in a statement that it has launched a joint investigation with the country's health authorities and business regulator into Baidu.
The company's chief executive Robin Li has also been asked by the Internet regulator to answer queries, the Economic Information Daily, which is owned by the official Xinhua news agency, on Tuesday quoted sources as saying.
"Baidu has been operating in a grey area where the rule of law, business profits and public interests are intertwined," a columnist wrote on Tuesday in the Global Times newspaper, which is close to the ruling Communist Party.
"Baidu must face discipline by authorities for its unscrupulous activities driven by desire for profits," it added.
Baidu said it "welcomed" the probe and would "fully cooperate" with investigators.
In a separate statement emailed to AFP on Tuesday, a company spokeswoman said: "Our deepest condolences go out to Wei Zexi's family."
"Baidu is a trusted company and we uphold extremely high standards to make our platform safe and trustworthy," she added.
Baidu is often seen as China's equivalent of Google although the US firm is hardly a direct competitor as it is blocked on the mainland and terminated most of its operations in 2010 after controversy over the country's online controls.
Search services accounted for nearly 84 percent of Baidu's total revenues last year, the company's annual report showed.
Most of the business came from customers "who pay us a fee based on click-throughs for priority placement of their links in the search results", it said.
Baidu's lucrative online marketing business has been hugely controversial.
The company came under fire earlier this year for selling the right to manage an online haemophilia forum to an unlicensed private hospital. The hospital used the platform for self-promotion and deleted comments that challenged its credentials, Xinhua said Monday.
In 2011 Baidu was forced to apologise after China's state television reported about fraudulent advertisements on its platforms that ranged from phoney airline tickets to unlicensed pharmaceutical adverts.
China's health authority announced Tuesday that it, the military and armed police were jointly probing the Second Hospital of Beijing Armed Police Corps, where Wei had the failed therapy.
Private healthcare firms from Putian, in the eastern province of Fujian which have a reputation for overprescription and false advertising are believed to have links with the hospital, media reports said.
Local governments have no authority to supervise hospitals run by the military and armed police, making them especially appealing to unscrupulous third-party service providers especially since patients trust public health facilities more than private ones.
The People's Liberation Army and armed police have significant business interests. But in March authorities ordered them to stop providing "paid services", which could eliminate such hospital contracts.