Compile Java source code from a string?

What you need is a class that extends JavaFileObject

import java.net.URI;

import javax.tools.SimpleJavaFileObject;

public class JavaSourceFromString extends SimpleJavaFileObject {
    final String code;

    public JavaSourceFromString( String name, String code) {
        super( URI.create("string:///" + name.replace('.','/') 
               + Kind.SOURCE.extension),Kind.SOURCE);
        this.code = code;
    }

    @Override
    public CharSequence getCharContent(boolean ignoreEncodingErrors) {
        return code;
    }
}

Which can be used as follows:

JavaCompiler jc = ToolProvider.getSystemJavaCompiler();
if( jc == null) throw new Exception( "Compiler unavailable");

String code = "public class CustomProcessor { /*custom stuff*/ }";
JavaSourceFromString jsfs = new JavaSourceFromString( "CustomProcessor", code);

Iterable<? extends JavaFileObject> fileObjects = Arrays.asList( jsfs);

List<String> options = new ArrayList<String>();
options.add("-d");
options.add( compilationPath);
options.add( "-classpath");
URLClassLoader urlClassLoader =
         (URLClassLoader)Thread.currentThread().getContextClassLoader();
StringBuilder sb = new StringBuilder();
for (URL url : urlClassLoader.getURLs()) {
    sb.append(url.getFile()).append(File.pathSeparator);
}
sb.append( compilationPath);
options.add(sb.toString());

StringWriter output = new StringWriter();
boolean success = jc.getTask( output, null, null, options, null, fileObjects).call(); 
if( success) {
    logger.info( LOG_PREFIX + "Class has been successfully compiled");
} else {
    throw new Exception( "Compilation failed :" + output);
}

Sure. Have a look at the JavaCompiler class and the other classes in the javax.tools package.

They've been around since Java 1.6.

Here is some example code.

(As pointed out by @Sergey Tachenov in the comments, it needs JDK to be installed as the necessary tools.jar file comes with JDK but not JRE.)