Istio is an open-source service mesh that helps manage microservices in cloud-native applications. It provides a way to control how different services communicate with each other, offering features like traffic management, security, and observability without requiring changes to the application code. By using Istio, developers can easily implement policies for routing traffic, enforcing security protocols, and monitoring service performance. This simplifies the complexities of managing microservices, allowing teams to focus on building and deploying applications more efficiently while ensuring reliability and security in their interactions.