To shrink wool in the dryer, the wool must first be wet, either from the washing machine or with a steam iron, and then dried out in a dryer or by air drying.
When steaming the wool, it's important to place the wool on a flat surface that is not wooden. It's also important to have an even application of steam to get a good result.
The wool can be tumble dried on either low or medium and should be checked periodically to make sure it is shrinking evenly. While the heat and tumble are likely to shrink the wool, wool fibers are malleable enough that the wool can become lumpy. Drying the wool too long causes the wool to be felted, which is still usable, but stiff. It is possible to dry the wool by laying the wool flat and air drying it. With this method, the wool should be laid out in desired final shape while drying. Shrinking wool can be a long process, and is best done small amounts at a time in order to achieve the desired size. Garments that say "pre-shrunk" on their labels may show little to no change when dried using these methods.