what should i upgrade ?

CPU. The i7-2600 is fine... but ideally and realistically, you should be aiming for the i7-2600K If you're buying Intel chips (and you should! <3) it's a waste of time and money to get the non-K models as they can't be overclocked. The i5 and i7 can hit 4Ghz++ on air cooling alone, let alone what you can do with a half decent liquid kit, so you lose out on enormous performance increase potential by restricting yourself to a non-K chip.

The GPU is okay, you won't have any problems with the majority of games out there. It's old tech now, three generations old to be precise, so you're probably better served with a 6950 or 7950 (or equivalent nV; 560ti/570/660ti/670) but meh, the 6850 will still game with the best of them.

Other than that? There's nothing else worth/requiring upgrading, to be honest. New SSD, new GPU, new CPU, that's all you need <3

Are you on 4GBs of RAM or is it 4GB X 2? If you're on 4GBs, upgrade that. Otherwise your rig seem to be fine. Put it in an SSD, I guess.

Get SSD for OS and important programs and games. You will feel big difference in their performance and speed with it. But that's just my opinion. You should definitely get better motherboard - something from Z77 series. I would personally recommend Gigabyte G1.Sniper M3 (going to get it as soon as I can myself).

As others are saying a nice SSD would help, but make sure you get a proper one. Otherwise I would look at the GPU, but it depends on what you use as resolution to game too. I for example have triple monitor and therefore run at 2560x1080 (3x 1920x1080), so I have 2x GTX670.

Soon the new 700 series is coming out and rumours are that the top card will have 6GB!

Also as said, do you have 2x4GB or 2xRAMM totalling to 4GB, but I expect 2x4GB totalling to 8GB :)

SSDs are leisure, rather than a necessity. I only added mine after my rig was completely established in all other aspects. For increased gaming performance, SSDs will do next to nothing. You can get one for decreased load times on some games, and your OS will be overall much snappier, but I'd go with a new GPU first of all. What's your PSU?

Like most others already said, buy a SSD!
I bought one myself (Crucial M4 256GB), and it rocks :)
At first i just wanted a small 64GB for the OS, then i thought about going a bit bigger to 128GB to install some games/programs too.
And in the end i bought a 256GB. And that is already full, thanks to all the games one wants to run from it haha :D

SSDs i can recommend are, the Crucial M4 and Samsung 830 or 840 basic (pro is better in the theory and if you want to pay so much more)

The ram is 2x4GB yes? That's still enough.

The GPU could need a upgrade. I would look at a AMD Gigabyte 7870 OC for example.

Like everyone is saying get a SSD :)

I'd buy an SSD. I personally bough a Samsung 840 250GB: great value for the money. Also very functional migration software and tuner. Once a week I do a full backup (1:1 copy of it on the old HD) using Macrium Reflect, which is free.
I'd also start saving for the GPU. It's the only piece in your setup that will become "old" in less than 1 year. :)
For this one I'd wait at least to see how the "next gen" games will perform.

Tnx all for the quick and usefull information. Its just amazing how fast people are willing to help :P

Upgrade damage!

SSD, or video card if you're struggling with some high end games ;)

SSD http://www.tomshardware.com/reviews/ssd-recommendation-benchmark,3269.html
GPU http://www.tomshardware.com/reviews/gaming-graphics-card-review,3107-4.html

check if your mobo supports the speed of GPU when you getting it.

hmm I believe everyone already talked about your specs; but you also might benefit from keyboard/mouse/headset upgrades too, what are you using right now?

Your pc is fine , upgrade your steam inventory instead. :)

I have a similar computer to you.

Have been thinking about upgrading the whole system to the 4th gen i7 this summer coming once it's released.

There's no point. Simple.

If you are struggling with FPS on full graphics settings with AAA turned up full blast, just get a second gfx card and crossfire them.

Lose the green drive. i would not even put my games on one.
Get an ssd for your OS and a nice WD black for your games.