Yes, organic cotton does shrink.
More Info: All cotton that is not treated or preshrunk will shrink including organic cotton. Many manufacturers of organic cotton clothing understand how much their cotton fabric will shrink and compensate for this by cutting the garment to a larger size to allow for shrinkage. So the garment may be big when it is first purchased, but when washed will shrink to the size on the label.
“Organic Cotton and Fabrics FAQ’s > Articles – Gaiam – Organic Cotton, Eco Products and Yoga & Pilates Fitness DVDs..” Gaiam – Organic Cotton, Eco Products and Yoga & Pilates Fitness DVDs.. N.p., n.d. Web. 2 Nov. 2011. <http://www.gaiam.com.au/Article/OrganicFAQ.aspx>.
“Organic Cotton Facts – Organic Trade Association.” Organic Trade Association. N.p., n.d. Web. 14 Nov. 2011. <http://www.ota.com/organic/mt/organic_cotton.html >