Yes, but they must give you notice. From a legal standpoint, the bank has an agreement with you to allow you to overdraw your account up to a set limit. Therefore, you have a reasonable expectation, based on past experience, that overdrafts will be covered up to the set limit. If the bank fails to notify you of any reduction, you may have a case for lender liability for any hardship a bounced check may have caused (and possibly punitive damages).
Typically, a bank should give you at least one weeks notice before terminating your overdraft privilege. This gives you time to make other arrangements before the bank starts bouncing checks.