He was killed during the fight against the wooden soldiers in Fabletown. His body was then commited to the Witching Well. Mama Bear then became pregnant again and so the Fable once more had three bears.
In the story of "Goldilocks and the Three Bears" the Three Bears leave their house to take a walk. When they return they find a girl, Goldilocks, had tried their porridge, eating all of Baby bear's, sat in their chairs and broken Baby bear's and is now sleeping in baby bear's bed.