Mentioned in Small Gods, this nation was at one point conquered by Omnia. It was the birthplace of Sergeant Simony, who as a child saw his country being annexed by the Omnian theocracy, witnessed heretics being guided to true belief by the Quisition, and did not forget.
Istanzia occupies the space between the great River Smarl to the hubwards, and by the River Slipnir to the rimwards. The silt carried by these rivers, over millenia, became the grey clay which formed the basis for Istanzia's pottery industry. Following centuries of depredation by Omnia, the clay is practically all worked out and the forests gone, used as kindling to feed the kilns making brick to build Citadels and temples. Today's Istanzians are not happy with this and the miiltary junta which took over following independence from Omnia has rebuilt a substantial army directed from the capital city of Georginople.
By the time of The Fifth Elephant, Istanzia has become independent and sent an ambassador to Ankh-Morpork. They also have an army, as Istanzian troops were transgressing over the Slipnir River into Omnia. Lord Vetinari comments on Sam Vimes's diplomatic skills in regards to this situation- Vimes told the ambassador that any further transgressions would involve the ambassador "going home in an ambulance." Their armed forces have since pulled so far back that they are nearly in the next country.