Yes, they can form alliances, but they can't achieve a diplomatic victory.

Do you play with tech trading on or off?

The AI rarely researches Alliances on its own (please, please, give that tech a higher AI priority Stardock!), but when traded, they form alliances a lot.

I found with tech trading off, that they do research alliances on their own quite a lot, or steal it from the one who got it first. I've always seen at least 2 or 3 different alliance groups in my games. Yor & Korath, Drengin & Terran, and Torian & Arcean(though the Arceans have a pesky habit of aligning themselves with the Drengin or Korath, generally making the galaxy a hard place to live with super warrior, and super dominator or super annihilator breathing down your neck).