Additional Steps for Installing Istio on SUSE® Rancher Prime: RKE2 and SUSE® Rancher Prime: K3s Clusters

When installing or upgrading the Istio Helm chart through Apps,

If you are installing the chart, click Customize Helm options before install and click Next.
You will see options for configuring the Istio Helm chart. On the Components tab, check the box next to Enabled CNI.
Add a custom overlay file specifying cniBinDir and cniConfDir. For more information on these options, refer to the Istio documentation. An example is below:

RKE2
K3s

apiVersion: install.istio.io/v1alpha1
kind: IstioOperator
spec:
  components:
    cni:
      enabled: true
      k8s:
        overlays:
        - apiVersion: "apps/v1"
          kind: "DaemonSet"
          name: "istio-cni-node"
          patches:
          - path: spec.template.spec.containers.[name:install-cni].securityContext.privileged
            value: true
  values:
    cni:
      cniBinDir: /opt/cni/bin
      cniConfDir: /etc/cni/net.d

apiVersion: install.istio.io/v1alpha1
kind: IstioOperator
spec:
  components:
    cni:
      enabled: true
      k8s:
        overlays:
        - apiVersion: "apps/v1"
          kind: "DaemonSet"
          name: "istio-cni-node"
          patches:
          - path: spec.template.spec.containers.[name:install-cni].securityContext.privileged
            value: true
  values:
    cni:
      cniBinDir: /var/lib/rancher/k3s/data/current/bin
      cniConfDir: /var/lib/rancher/k3s/agent/etc/cni/net.d

Result: Now you should be able to utilize Istio as desired, including sidecar injection and monitoring via Kiali.