Replace object instance with another in C#

You could do that if you embed your object into another one that is used to access the object.

class ObjectReference<T>
   where T : new()
{
    private T _obj = new T();

    public void CreateNewObject()
    {
        _obj = new T();
    }

    public T Value { get return _obj; }
}

Now you can create multiple references to an object of type ObjectReference and only change the local object. The "real" object would be accessed through the Value property

A slightly different approach is that you create a wrapper that implements the same interface as your "real" object, thus making this wrapping transparent.

interface ISomeInterface
{
    string PropertyA { get; set }
    void MethodB (int x);
}

class TheRealObject : ISomeInterface
{
    public string PropertyA { get; set }

    public void MethodB (int x)
    {
        Console.WriteLine(x);
    }
}

class Wrapper : ISomeInterface
{
    TheRealObject _obj = new TheRealObject();

    public string PropertyA
    { 
        get { return _obj.PropertyA; }
        set { _obj.PropertyA = value; }
    }

    public void MethodB (int x)
    {
        _obj.MethodB(x);
    }

    public void CreateNewObject()
    {
        _obj = new TheRealObject();
    }
}

Now the wrapper can be used as if it was the "real" object. You could also pass an initial instance of the "real" object in the wrapper's constructor and remove the initializer of _obj.

Since an object state is defined by field values, you can copy memory, containing field values, from one object to another, effectively "replacing" it:

public static void Replace<T>(T x, T y)
    where T : class
{
    // replaces 'x' with 'y'
    if(x == null) throw new ArgumentNullException("x");
    if(y == null) throw new ArgumentNullException("y");

    var size = Marshal.SizeOf(typeof(T));
    var ptr = Marshal.AllocHGlobal(size);
    Marshal.StructureToPtr(y, ptr, false);
    Marshal.PtrToStructure(ptr, x);
    Marshal.FreeHGlobal(ptr);
}

Note that this code requires [StructLayout(LayoutKind.Sequential)] (or LayoutKind.Explicit) attribute defined for a class.

No, that's not possible.

To actually change all references to an object, you would have to freeze all threads in the process, and access their register sets and stack. That's what the garbage collector does, but it's not possible for regular code.

What the method most likely does is to make a deep copy of one object onto the other.