1: Replace WordPress files
2: Get the latest WordPress zip (or tar.gz) file.
3: Unpack the zip file that you downloaded.
4: Delete the old wp-includes and wp-admin directories on your web host (through your FTP or shell access).
5: Using FTP or your shell access, upload the new wp-includes and wp-admin directories to your web host, overwriting old files.
6: Upload the individual files from the new wp-content folder to your existing wp-content folder, overwriting existing files. Do NOT delete your existing wp-content folder. Do NOT delete any files or folders in your existing wp-content directory (except for the one being overwritten by new files).
7: Upload all new loose files from the root directory of the new version to your existing wordpress root directory.
NOTE – you should replace all the old WordPress files with the new ones in the wp-includes and wp-admin directories and sub-directories, and in the root directory (such as index.php, wp-login.php and so on). Don’t worry – your wp-config.php will be safe.
Be careful when you come to copying the wp-content directory. You should make sure that you only copy the files from inside this directory, rather than replacing your entire wp-content directory. This is where your themes and plugins live, so you will want to keep them. If you have customized the default or classic themes without renaming them, make sure not to overwrite those files, otherwise you will lose your changes. (Though you might want to compare them for new features or fixes..)
Lastly you should take a look at the wp-config-sample.php file, to see if any new settings have been introduced that you might want to add to your own wp-config.php
Courtesy :- http://codex.wordpress.org/