Yes. You can make an activity code (activity item) inactive even if it has already been used in projects and time entries. Making it inactive does not change or delete any existing time entries, but it does remove that code from all Activity drop-downs, so it can no longer be selected for new time entries. Copying time entries with inactive activity items is also not allowed.
If you ever need to reuse it, you must change its Status back to active from the Activity Items screen.