Yes, you can even hang over wall tile, brick, cinder block and textured walls. While there are a number of methods, the simplest is to use what is called lining paper. This is a special type of blank wall covering stock that is hung over the paneling (or tile, etc.) to provide a smooth surface over which your regular wall covering is then hung. You'll be amazed at how much brighter a panelled room will look when the old paneling is covered with wallpaper.