A B737-400 Flight Crew initiated an emergency descent and accomplished appropriate checklists when they received a cabin altitude warning. Although they regained pressurization control the Flight Attendants reported a loud noise at the rear cabin doors. They diverted to a nearby airport where maintenance discovered the outflow valve was restricted from closing by a piece of insulation blanket.

Narrative

During cruise flight at FL330 the Cabin Altitude Warning Horn sounded. Accomplished the QRC and QRH checklists. Donned O2 masks and tried to gain control of the pressurization system. Cabin continued to rise when switch placed to STBY and continued to rise when switch placed to Manual AC and valve switch placed to close per the QRH. The cabin was rising about 1000 fpm and the Captain asked me to declare an emergency with ATC and request lower. ATC was notified and we requested 10;000 feet. The Cabin Altitude was 11;000 feet and climbing as we started the descent. Passing FL180 we reset our altimeters and rechecked pressurization and cabin altitude was at 12;000 and still climbing. I tried moving the manual outflow valve to open and then closed per the Captain's suggestion. This reset the system and the cabin pressure started to return to normal. We requested 15;000 feet for level off as the cabin altitude came back through 9000 feet correcting back to normal. At 15;000 feet we notified dispatch and maintenance control. We briefed the passengers and the Flight Attendants. As the cabin returned to normal we decided to climb back to FL250 to check fuel and pressurization to see if we could make it to our destination. At FL250 we undeclared the emergency with ATC and checked the fuel and we did not have enough to continue. We were contemplating a climb back to FL330 which would have allowed us to continue on when we got a call from the Flight Attendants. They had just returned to the rear galley with their carts and noticed a loud air noise coming from what appeared to be both galley doors. I could hear the noise over the intercom. They said it began about when we started the Emergency Descent. We updated dispatch and maintenance and told them we were not going to continue to our destination. We were told to divert to ZZZ for maintenance. After we landed maintenance informed us there was a piece of insulation blanket hanging out of the outflow valve.