It is very difficult when the people we love and want a relationship decompensate, and I admire your tenderness and compassion. However, a paranoid delusion is nothing to try and deal with on your own. There is potential for him to hurt you, someone else, or himself during these states and justify it with these irrational thoughts. This is a situation that requires professional assistance with an evaluation from a psychiatrist or psychiatric nurse practitioner.
Set a clear boundary with the primary goal of protecting yourself physically and emotionally. This is not an opportunity for you to reason with or convince him. This is a situation you must view as a self-care priority with your well-being coming first and foremost. Individuals can recover from these episodes, but it will require professional guidance and (most likely) medication. An evaluation for him is imperative.
It is not uncommon for intimacy to be the trigger for such episodes and you may not be able to offer more than your compassion from a distance. If he is sleeping with a knife he intends to use it if he feels it is necessary—and that necessity may be determined by a delusion. Worse—the use of drugs may exacerbate his anxiety and disordered thoughts.
Set clear boundaries for yourself. Explain that his actions and behavior are such that you are concerned and cannot be with him until he finds some help. I know this seems difficult, but your well-intentioned acts can easily be misinterpreted and used to justify his paranoia. Don’t put yourself in harms way.
Wishing you patience and peace,
Proof Positive Blog @ PsychCentral