The earlier you can do it in the page lifecycle, the better. Make sure you do it before the page's prerender event.

    void b_Click(object sender, EventArgs e)
    {
        ((Label)FindControl("mylabel")).Text = DateTime.Now.ToString();
    }
    protected void Page_Load(object sender, EventArgs e)
    {

        ScriptManager sm = new ScriptManager();
        sm.ID = "sm1";
        sm.SupportsPartialRendering = true;
        sm.EnablePartialRendering = true;

        this.form1.Controls.Add(sm);

        UpdatePanel up = new UpdatePanel();
        up.ID = "up";
        up.RenderMode = UpdatePanelRenderMode.Block;
        up.UpdateMode = UpdatePanelUpdateMode.Always;

        this.form1.Controls.Add(up);

        Button b = new Button();
        b.Text = "Click me";
        b.Click += new EventHandler(b_Click);

        up.ContentTemplateContainer.Controls.Add(b);

        Label l = new Label();
        l.Text = "";
        l.ID = "mylabel";

        up.ContentTemplateContainer.Controls.Add(l);
    }