People like this are a pain in the ass to deal with. If it's only with games and sports and whatnot I'd say the first thing to try is just avoiding doing things with him that he's going to feel competitive about. If he's a jerk when playing sports, don't play those with him.
If he's competitive about EVERYthing, though, that's a different story. Not much you can do about that since it sounds like it's a part of his self esteem problems. He HAS to win in order to prove himself... to everyone, including himself. Regardless of what his problem is, you should probably talk to him about it. Don't be a prick and get in his face, just explain it. Tell him his obsession with winning makes doing things like sports and games a chore and, after a while, you don't want to play with him because of it. Avoid making it seem like hanging out with him PERIOD is a pain because that'll make him more defensive. Just lay it on the table and tell him you're not going to do that shit with him if he keeps being a self centered jackhole.
If he keeps this crap up you're going to have to evaluate for yourself whether it's worth staying friends with him or not. Play it cool and don't let him make you out to be the bad guy. Good luck.