Envoy is a big part of the solution, yes. But it isn't the only component. A control plane layer, including an auth component and an adaptable policy enforcement and telemetry collection component, is included as well.
Istio adds an automation layer on top of Envoy proxy mesh that allows global cross-cutting policy enforcement. Many of us actively contribute back to Envoy, and there's a lot of exchange of ideas between the two projects on designing the next generation of the config for Envoy.
More info is available in the overview doc here: https://istio.io/docs/concepts/what-is-istio/overview.html