I installed latest Xcode (4.3.2) which comes as package, can I delete the older versions?
Can I safely remove old versions of Xcode which are using a lot of space?


Yes.


  If I can, what should I do?


Run:

sudo &lt;Xcode&gt;/Library/uninstall-devtools --mode=all


Where &lt;Xcode&gt; is usually /Developer but can sometimes be ~/Developer depending on whether you installed it with sudo privileges or not.

Once you've run that script you can just move /Developer or ~/Developer to the trash, you don't need it any more.

You can can get more details about uninstalling by reading the About Xcode.pdf document in your  directory.

If you also have a /Developer-old directory you can just move that to the trash.