I used to do this with my friends all the time. Then someone suggested I seek treatment for depression. After some deep introspection (and medication) I was able to gain perspective on what I was actually doing. I was trying to get people to like me and like being around me. The same was true at Christmas time; I would buy extravagant gifts for everyone I knew, often for those that couldn't buy anything in return. I didn't expect anyone to reciprocate, I just wanted them to know I wanted to be friends.

Years later, I see some of my friends that do this same thing, whereas I've adopted a more frugal lifestyle. It took a long time, but I eventually realized that if people don't like me for who I am as a person, I don't need them in my life. I don't need to "buy" acceptance any more. My closest friends are the sort of people that can have a relaxing pot luck at my house rather than splurging at a resturant.

My best suggestion would be to have an honest conversation with this fellow. If he wants to pay, gently remind him that you like to pay your own way and you don't want to take advantage of him. If he insists, be firm. If he puts up a fight, look him in the eye and tell him No. Reassure him that paying your own way doesn't change your friendship. It will begin to sink in eventually, and he will respect you more for it in the long run.