It's said that if Cicero is spared in The Cure for Madness quest, he remains in the Dawnstar sanctuary and can be later hired as a follower. Well I did just that and I can't find him anywhere. Where exactly is he? Does he disappear and only reappear after some other moment in the game?
If you spare Cicero in the quest A Cure For Madness then he will be available later in the quest line from the Dawnstar Sanctuary. Specifically, he will appear when Hail Sithis has been completed and the Dragonborn first leaves the Sanctuary through the front door.
After some amusing dialogue, he will enter the sanctuary (assuming you don't take him on as a follower straight away) and can be found next to the Night Mother's coffin on the balcony near the stairs. It's fairly gloomy in there even with the furnishings purchased so a detect life spell may help until you get used to where he will be.
From the Elderscrolls wiki
If the Dragonborn chose to spare his life, Cicero is found upon exiting the Dawnstar Sanctuary after the quest where he becomes a possible follower. Cicero is flagged as essential before "The Cure for Madness". If he is spared, he becomes essential again, making him unable to be killed.