The British Press Association reported that Dewani (33) was being treated at a hospital in Bristol for depression and post-traumatic stress disorder.
Last month, the Westminster Magistrate's Court heard that his condition had "improved significantly".
Dewani's 28-year-old wife Anni was shot when the taxi the couple were travelling in was hijacked in the Gugulethu township on the outskirts of Cape Town in November 2010.
On Wednesday, Clare Montgomery QC, for Dewani, said doctors had taken Dewani off the anti-anxiety medication which was helping him most with his condition, after a bad reaction. "We may have taken one step back, having taken two steps forward," she said.
In view of Dewani's condition, he had been sectioned for a further 12 months under the Mental Health Act.
It also emerged on Wednesday that the defence made proposals last month for Dewani to make a voluntary return to South Africa, although the details of the offer were not discussed in court.
Under the South African government's current plans, if Dewani was extradited he would be assessed upon arrival for mental health issues. If he was considered at risk, he would be taken to the psychiatric unit at Valkenberg Hospital in Cape Town, before being sent to Goodwood prison.
Magistrate rejects request
Hugo Keith QC, for the South African authorities, told the court they were happy for a defence expert to visit Valkenburg to assess its suitability. He said he would need to take instructions on whether a similar inspection of Goodwood was possible.
Keith argued that the South Africans would "trip over their corporate toes" to make sure that Dewani receives the right psychiatric support if he was extradited.
Chief magistrate Howard Riddle rejected a request from the defence to put back the full extradition hearing so an expert could visit Valkenberg in August.
"I am very, very reluctant to delay this case any further," he said. The full extradition hearing was expected to start on July 1. – Sapa