You can set an image as post thumbnail when it is in your media library. To add an image in your media library you need to upload it to your server. WordPress already has a function for putting images in your media library, you only need a script that uploads your file.
Usage:
Generate_Featured_Image( '../wp-content/my_image.jpg', $post_id );
// $post_id is Numeric ID... You can also get the ID with:
wp_insert_post()
Function:
function Generate_Featured_Image( $image_url, $post_id ){
$upload_dir = wp_upload_dir();
$image_data = file_get_contents($image_url);
$filename = basename($image_url);
if(wp_mkdir_p($upload_dir['path']))
$file = $upload_dir['path'] . "https://wordpress.stackexchange.com/" . $filename;
else
$file = $upload_dir['basedir'] . "https://wordpress.stackexchange.com/" . $filename;
file_put_contents($file, $image_data);
$wp_filetype = wp_check_filetype($filename, null );
$attachment = array(
'post_mime_type' => $wp_filetype['type'],
'post_title' => sanitize_file_name($filename),
'post_content' => '',
'post_status' => 'inherit'
);
$attach_id = wp_insert_attachment( $attachment, $file, $post_id );
require_once(ABSPATH . 'wp-admin/includes/image.php');
$attach_data = wp_generate_attachment_metadata( $attach_id, $file );
$res1= wp_update_attachment_metadata( $attach_id, $attach_data );
$res2= set_post_thumbnail( $post_id, $attach_id );
}
http://codex.wordpress.org/Function_Reference/wp_upload_dir
http://codex.wordpress.org/Function_Reference/wp_insert_attachment
EDIT:
Added path creation