Optimizing bulk update performance in PostgreSQL
Assumptions

Since information is missing in the Q, I'll assume:


Your data comes from a file on the database server.
The data is formatted just like COPY output, with a unique id per row to match the the target table.
If not, format it properly first or use COPY options to deal with the format.
You are updating every single row in the target table or most of them.
You can afford to drop and recreate the target table.
That means no concurrent access. Else consider this related answer:


Best way to populate a new column in a large table?

There are no depending objects at all, except for indices.


Solution

I suggest you go with a similar approach as outlined at the link from your third bullet. With major optimizations.

To create the temporary table, there is a simpler and faster way:

CREATE TEMP TABLE tmp_tbl AS SELECT * FROM tbl LIMIT 0;


A single big UPDATE from a temporary table inside the database will be faster than individual updates from outside the database by several orders of magnitude. 

In PostgreSQL's MVCC model, an UPDATE means to create a new row version and mark the old one as deleted. That's about as expensive as an INSERT and a DELETE combined. Plus, it leaves you with a lot of dead tuples. Since you are updating the whole table anyway, it would be faster overall to just create a new table and drop the old one.

If you have enough RAM available, set temp_buffers (only for this session!) high enough to hold the temp table in RAM - before you do anything else.

To get an estimate how much RAM is needed, run a test with a small sample and use db object size functions:

SELECT pg_size_pretty(pg_relation_size('tmp_tbl'));  -- complete size of table
SELECT pg_column_size(t) FROM tmp_tbl t LIMIT 10;  -- size of sample rows


Complete script

SET temp_buffers = '1GB';        -- example value

CREATE TEMP TABLE tmp_tbl AS SELECT * FROM tbl LIMIT 0;

COPY tmp_tbl FROM '/absolute/path/to/file';

CREATE TABLE tbl_new AS
SELECT t.col1, t.col2, u.field1, u.field2
FROM   tbl     t
JOIN   tmp_tbl u USING (id);

-- Create indexes like in original table
ALTER TABLE tbl_new ADD PRIMARY KEY ...;
CREATE INDEX ... ON tbl_new (...);
CREATE INDEX ... ON tbl_new (...);

-- exclusive lock on tbl for a very brief time window!
DROP TABLE tbl;
ALTER TABLE tbl_new RENAME TO tbl;

DROP TABLE tmp_tbl; -- will also be dropped at end of session automatically


Concurrent load

Concurrent operations on the table (which I ruled out in the assumptions at the start) will wait, once the table is locked near the end and fail as soon as the transaction is committed, because the table name is resolved to its OID immediately, but the new table has a different OID. The table stays consistent, but concurrent operations may get an exception and have to be repeated. Details in this related answer:


Best way to populate a new column in a large table?


UPDATE route

If you (have to) go the UPDATE route, drop any index that is not needed during the update and recreate it afterwards. It is much cheaper to create an index in one piece than to update it for every individual row. This may also allow for HOT updates.

I outlined a similar procedure using UPDATE in this closely related answer on SO.

&nbsp;