How can I dynamically create texture by stitching together sprites?

I want to procedurally generate a 2d tilemap without allocating a GameObject for each tile (I assume that's expensive). I've heard some people say to create a mesh for the whole level and texture it with one big texture.

But, I'm not sure how to create a texture from tiles.

I can create a texture like this:

var texture = new Texture2D (worldWidth * tileWidth, worldHeight * tileHeight, TextureFormat.ARGB32);

Texture2D has SetPixels and LoadImage and LoadRawTextureData methods but as far as i can tell those all set the whole texture.

How can I set just parts of a texture from sprite data?