Indeed they do! It's a cycle, the stars eject gasses and dust, and the dust gets hoovered up into other nebulae, to form more stars. The only way to from the heavier elements is by massive stellar explosions, so this cycle does not repeat ad infinitum, as at some point normal stellar fusion can no longer fuse the larger atoms.

A good rule of thumb is that if there is a lot of gas and dust, and it is energized, that is a good region to look for star formation. This isn't all there is to it, but I hope I helped explain it a little better for ya! :)