Button inside Update Panel is not triggered, in asp.net

Question

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Answer 1

Change the UpdatePanel's ChildrenAsTriggers property to true. This will cause any postbacks triggered by the UpdatePanel's child elements to update its content.

EDIT: Just realized that btn_Add is a nested control, so you will have to explicitly call it out as an UpdatePanel Trigger. Add the following to your UpdatePanel markup, after the ContentTemplate:

<Triggers>
    <asp:AsyncPostBackTrigger ControlID="btn_Add" /> 
</Triggers>

EDIT #2: To keep your modal popup from closing when an async postback occurs, move the UpdatePanel inside the panel specified by ModalPopupExtender's PopupControlID:

<asp:Panel ID="pnlpopup" runat="server">
    <asp:UpdatePanel ID="UpdatePanel1" runat="server" UpdateMode="Conditional" ChildrenAsTriggers="true">
        <ContentTemplate>
            <asp:ListBox ID="lst_allmembers" DataValueField="FirstName" runat="server" />
            <asp:Button ID="btn_Add" runat="server" Text="Add" OnClick="btn_Add_Click" />
            <asp:ListBox ID="lst_grpmembers" runat="server" />
            <asp:Button ID="btn_remove" runat="server" Text="Remove" />
            <asp:Button ID="btnUpdate" CommandName="Update" runat="server" Text="Update" OnClick="btnUpdate_Click" />
             <asp:Button ID="btnCancel" runat="server" Text="Cancel" />
        </ContentTemplate>
    </asp:UpdatePanel>
</asp:Panel>