Need to know what rental car agencies allow you to cross the border between Italy and Istria.
One thing you could do, Lynn, while you are waiting for an answer here, is have a look on the websites for the companies you might want to use There's just the chance the answers are there.
You need to tell the rental company. East Europe is considered high risk and they may restrict it to certain vehicles (higher end vehicles). Istria is in part Slovenia and in part Croatia. Slovenia is part of the EU and Schengen Zone, and shouldn't be an issue. Not so sure about Croatia.
Unless you are planning on returning the car to Italy you should carefully look at what the international drop charge would be.