Andres_D is right, we can very well do so using custom class loading, here is a detailed guide on how to do this: http://www.javaworld.com/javaworld/jw-06-2006/jw-0612-dynamic.html?page=1
The article explains how to write dynamic Java code. It discusses runtime source code compilation, class reloading, and the use of the Proxy design pattern to make modifications to a dynamic class transparent to its caller.
In fact researcher in Austria have written a JVM that even allows reloading classes with different type hierarchies. They have achieved this by using existing thread save points to generate a complete 'side universe' of an object and all it's related references and referenced content and then once fully reshuffled with all required changes simply swap in all changed classes. [1] Here a link to their project http://ssw.jku.at/dcevm/ the oracle sponsorship certainly makes for interesting speculations on future plans.
Less intrusive changes to method bodies and fields are already possible in the standard java VM using the Hot Swap capabilities of the JPDA as introduced in Java 1.4:
docs.oracle.com/javase/1.4.2/docs/guide/jpda/enhancements.html#hotswap
I'm not sure whether it was the first one but this Sun employee's paper from 2001 appears to be one of the early proposals mentioning the capabilities of the HotSpot to Hot Swap. [2]
REFERENCE
[1] T. Würthinger, C. Wimmer, and L. Stadler, “Dynamic Code Evolution for Java,” presented at the 8th International Conference on the Principles and Practice of Programming in Java, Vienna, 2010.
[2] M. Dmitriev, “Towards flexible and safe technology for runtime evolution of java language applications,” in OOPSLA Workshop on Engineering Complex Object-Oriented Systems for Evolution, 2001.