The invention relates to blended yarn which contains wool, pearl fiber, modal fibre and viscose, and a machining method thereof. The blended yarn is composed of wool, pearl fiber, modal fibre and viscose with the mass ratio as the following: wool 10-15%, pearl fiber 20-30%, modal fibre 30-35% and viscose 25-30%. The blended yarn can be in pure white, bleached to be white, gray, apricot, pinkish purple, or in other colors. The performance index meets the requirements that the single yarn rupture strength is 12.5-19.5cN/tex, the CV value of single yarn rupture strength is less than or equal to 6.0% and the CV value of yarn evenness variation coefficient is less than or equal to 15%. The processing method includes the following steps: dyeing according to the tinctorial pattern of a matching card (used for producing colored yarn), manually mixing the cotton and baling; grabbing the cotton through a disc, blending and opening the cotton, opening the cotton through carding pins, feeding cotton in the vibrating mode, single beater scutching, combing the cotton, drawing, roving, spinning, winding and packing.