Wool that shrinks due to an accidental hot water wash may be restretched. However, if shrinkage is noted only after the piece has been washed and dried, restretching is not helpful, according to About.com.
Mix cool water and 2 tablespoons of baby shampoo, then submerge the item to rehydrate the wool fibers. Soak it for at least 30 minutes. Do not rinse the wool; instead, carefully drain the excess water, and wrap the wool in a thick towel. Using stainless steel push pins, gently stretch the wool into shape and pin it securely to a cork bulletin board. Recheck it for dryness every few hours, and reshape it as needed.