It depends, but probably.  You may claim your sister if:

• She earned less than $4050
• You provided at least half of her support.

You may claim her son (your nephew) as a Qualifying Child if:

• Neither she nor the child's father claims him (he cannot claim him without her permission if he does not live with her.  She cannot claim him if you are claiming her as a dependent).
• He lived with you at least six months.

If these two points are true, claiming your nephew will have additional benefits on your tax return.  You will be able to claim Head of Household, Child Tax (or Additional Child Tax) Credit (since he's under 16), and, depending on your income, Earned Income Credit.  You will no doubt see a significant increase to your refund.  However, you do want to make sure you have proof that he is your nephew and that he was living with you at least 6 months.  The IRS may ask for the proof in the future.  However, you are entitled to claim your nephew if the above is true.