In developments which could well eclipse even the dramatic downfall of Chongqing party boss Bo Xilai, Mr Zhou - formerly a member of China's highest level of leadership, the Politburo Standing Committee - is understood to have been put under virtual house arrest since early this month.

He is the most senior party official to be formally investigated for corruption in Communist Party history.

As well as being the former head of China’s domestic security apparatus, with control over the police, courts and intelligence services, Mr Zhou, who turns 71 this month, has extensive ties to the state-owned oil sector and was also a former party secretary of Sichuan province, home to more than 80 million people in China’s west.

In pursuing the case, Mr Xi has broken a long-standing unwritten rule not to target members of the standing committee past or present, in the interests of maintaining political stability within the party.

After Mr Xi took leadership, he vowed to take on corruption at higher and lower levels within the party – both “tigers and flies”.

“Xi can't build his authority if he doesn't fight a real big tiger during this anti-corruption campaign,” one source said, referring to the investigation into Mr Zhou.

“It’s not like in the past few months, when [Mr Zhou] was being secretly investigated and more softly restricted,” a lawyer with ties to the leadership told The New York Times. “Now it’s official.”

The net around Mr Zhou has been tightening since the start of the year, with a series of close associates from the oil industry and Sichuan either arrested or called in for questioning.

The principal allegations against him emerged from investigations over the past year into allegations of abuse of power and corruption by officials and oil company executives associated with him. Those inquiries have already ensnared his son, Zhou Bin, and other family members, including his wife, Jia Xiaoye.

“There has been a lot of preparatory work that has gone into this,” political analyst Chen Ziming said. “When the water flows, a channel is naturally formed.”

The Chinese government has neither confirmed nor denied reports of Mr Zhou’s house arrest, despite reports it would soon officially announce the investigation into Mr Zhou and hand the case over to prosecutors.

The main stumbling block to the investigation had been  party leaders' fear that Mr Zhou’s links with numerous powerful circles could unlock a Pandora’s Box of revelations  implicating other senior leaders. Mr Zhou also enjoyed the patronage of party elders such as former president Jiang Zemin and former vice-president Zeng Qinghong.

“The Zhou case is being slowly and deliberately peeled back step by step in order to maintain the control and stability of the party,” one source told Fairfax Media.

But Mr Zhou’s position has weakened since Bo, his close ally and designated successor, was expelled from the party and jailed for life in September after a scandal stemming from his wife’s murder of British businessman Neil Heywood.

“Zhou will not be given as public a trial as Bo Xilai,” another source said. “He has become a half-dead tiger who lost its teeth and claws.”

After Mr Zhou retired in November 2012, his successor in charge of domestic security was not given a place on the standing committee, a move party insiders said reflected concern among the elite over the influence that the position had accumulated.

Soon afterwards, the party's anti-corruption officials also began removing and investigating a succession of officials and company executives who had career links with Mr Zhou, including Li Chuncheng, a deputy party chief of Sichuan Province, and Jiang Jiemin, a former chairman of oil giant PetroChina.

Mr Zhou was last seen in public at an alumni celebration at the China University of Petroleum on October 1.