The thing to look for is the dark pink building with the Nako sign above, which is located on the left side of the road as you go down (a couple of blocks from the Grand Bazaar). You know you found the right place when you see the "Kurkçu Han" sign. The entrance to the courtyard is a bit narrow and has a staircase on each side. Just go ahead and you'll find yourself in this courtyard full of houseware and yarn shops.
The shops have all sorts of items displayed outside, including bins full of cheap yarn (and also nice kitchen towels, by the way). I entered this small shop located on the left corner...
And this is what I found inside. Most of the yarn is unfortunately acrylic, and to find the 100% wool just look for the 100% yun labels.
In this shop I ended up getting a few Lanoso wool/cashmere skeins.
Going up the staircase you'll find even more shops.
At the Nako shop I got some Nako Super Saf Yun, very good value for the yardage you get (about 8 EUR for 3 skeins, aprox. 720 m)
In this shop there was also some superwash sock yarn, very similar (if not identical) to the ones I usually get in Germany
Also on the corridors there were some interesting things to explore.
Yarn with pom-poms !
Or even better, yarn with beads and flower bits ...
And our last find, some gigantic skeins of yarn for just 2 turkish liras (unfortunately mostly acrylic, but for that money it was still a very good bargain !)