Found lots of advice on Google. Summarized below:
If you handwash, do it very very gently, in pleasantly warm water - not hot. Do it in a bathtub so that there's plenty of space. Don't rub, just swish. If you need to get dirt out, squeeze it through. Use detergent that is specially for wool and silk - this really makes a difference to the softness, so is worth the expense (besides it doesn't 'go off', so you just keep for next use). Drain the tub with the blanket in it, and squeeze out the water - don't wring. Rinse 3 times in the same way, finishing with a cool rinse, and then lay it out on a thikc towel. Role up, squeeze gently to remove excess water. Lay it out on a dry towel and leave to air dry flat.
This sounds like a lot of faff, but if you don't have a good wool wash cycle on your machine, or you have something particularly delicate, it is worth the effort.
Because it stretches easily when wet, the handling and drying advice is very important.