diff --git a/sdk/identity/identity/integration/AzureKubernetes/package.json b/sdk/identity/identity/integration/AzureKubernetes/package.json
index e817d3c7abb7..1991ac1cb528 100644
--- a/sdk/identity/identity/integration/AzureKubernetes/package.json
+++ b/sdk/identity/identity/integration/AzureKubernetes/package.json
@@ -11,7 +11,7 @@
   "author": "",
   "license": "ISC",
   "dependencies": {
-    "@azure/identity": "dev",
+    "@azure/identity": "beta",
     "@azure/storage-blob": "^12.17.0",
     "express": "^5.2.1",
     "dotenv": "^16.0.0"
diff --git a/sdk/identity/identity/integration/AzureWebApps/package.json b/sdk/identity/identity/integration/AzureWebApps/package.json
index 511905204fd6..2225b0cb13c9 100644
--- a/sdk/identity/identity/integration/AzureWebApps/package.json
+++ b/sdk/identity/identity/integration/AzureWebApps/package.json
@@ -13,7 +13,7 @@
   "type": "module",
   "license": "ISC",
   "dependencies": {
-    "@azure/identity": "dev",
+    "@azure/identity": "beta",
     "@azure/storage-blob": "^12.17.0",
     "express": "^5.2.1",
     "tslib": "^1.10.0"
diff --git a/sdk/identity/identity/test/integration/azureFunctionsTest.spec.ts b/sdk/identity/identity/test/integration/azureFunctionsTest.spec.ts
index 7d0ce8f5cebe..18018e6ca511 100644
--- a/sdk/identity/identity/test/integration/azureFunctionsTest.spec.ts
+++ b/sdk/identity/identity/test/integration/azureFunctionsTest.spec.ts
@@ -7,8 +7,7 @@ import { describe, it, assert } from "vitest";
 import { requireEnvVar } from "../authTestUtils.js";
 
 describe("AzureFunctions Integration test", function () {
-  // TODO: Reenable the test https://github.com/Azure/azure-sdk-for-js/issues/35416
-  it.skip("test the Azure Functions endpoint where the sync MI credential is used.", async function () {
+  it("test the Azure Functions endpoint where the sync MI credential is used.", async function () {
     const baseUri = baseUrl();
     const client = new ServiceClient({ baseUri: baseUri });
     const pipelineRequest = createPipelineRequest({
diff --git a/sdk/identity/test-resources-managed-identity.bicep b/sdk/identity/test-resources-managed-identity.bicep
index 05f5f90a2a21..579ffdf5328e 100644
--- a/sdk/identity/test-resources-managed-identity.bicep
+++ b/sdk/identity/test-resources-managed-identity.bicep
@@ -6,6 +6,9 @@ param baseName string = resourceGroup().name
 @description('The location of the resource. By default, this is the same as the resource group.')
 param location string = resourceGroup().location
 
+@description('The AKS cluster location. Defaults to eastus2 to avoid capacity constraints in the resource group region.')
+param aksLocation string = 'eastus2'
+
 @description('The client OID to grant access to test resources.')
 param testApplicationOid string
 
@@ -220,6 +223,7 @@ resource azureFunction 'Microsoft.Web/sites@2022-09-01' = {
       alwaysOn: true
       http20Enabled: true
       minTlsVersion: '1.2'
+      linuxFxVersion: 'Node|22'
       appSettings: [
         {
           name: 'IDENTITY_STORAGE_NAME_1'
@@ -253,10 +257,6 @@ resource azureFunction 'Microsoft.Web/sites@2022-09-01' = {
           name: 'FUNCTIONS_WORKER_RUNTIME'
           value: 'node'
         }
-        {
-          name: 'DOCKER_CUSTOM_IMAGE_NAME'
-          value: 'mcr.microsoft.com/azure-functions/node:4-node24-appservice'
-        }
       ]
     }
   }
@@ -293,7 +293,7 @@ resource acrResource 'Microsoft.ContainerRegistry/registries@2023-01-01-preview'
 
 resource kubernetesCluster 'Microsoft.ContainerService/managedClusters@2023-06-01' = {
   name: baseName
-  location: location
+  location: aksLocation
   identity: {
     type: 'SystemAssigned'
   }
@@ -305,7 +305,7 @@ resource kubernetesCluster 'Microsoft.ContainerService/managedClusters@2023-06-0
       {
         name: 'agentpool'
         count: 1
-        vmSize: 'Standard_D2s_v3'
+        vmSize: 'Standard_D2s_v5'
         osDiskSizeGB: 128
         osDiskType: 'Managed'
         kubeletDiskType: 'OS'
diff --git a/sdk/identity/test-resources-post.ps1 b/sdk/identity/test-resources-post.ps1
index 5b35158c4ac3..75185df19cb8 100644
--- a/sdk/identity/test-resources-post.ps1
+++ b/sdk/identity/test-resources-post.ps1
@@ -61,17 +61,18 @@ if ($CI) {
 }
 
 # Azure Functions app deployment
-# TODO: Skip Azure Functions deployment for timeout error
-# Write-Host "Building the code for functions app"
-# Push-Location "$webappRoot/AzureFunctions/RunTest"
-# npm install
-# npm run build
-# Pop-Location
-# Write-Host "starting azure functions deployment"
-# Compress-Archive -Path "$workingFolder/AzureFunctions/RunTest/*"  -DestinationPath "$workingFolder/AzureFunctions/app.zip" -Force
-# az functionapp deployment source config-zip -g $identityResourceGroup -n $DeploymentOutputs['IDENTITY_FUNCTION_NAME'] --src "$workingFolder/AzureFunctions/app.zip"
-# Remove-Item -Force "$workingFolder/AzureFunctions/app.zip"
-# Write-Host "Deployed function app"
+Write-Host "##[group]Deploying Azure Functions App"
+Write-Host "Building the code for functions app"
+Push-Location "$webappRoot/AzureFunctions/RunTest"
+npm install
+npm run build
+Pop-Location
+Write-Host "starting azure functions deployment"
+Compress-Archive -Path "$workingFolder/AzureFunctions/RunTest/*"  -DestinationPath "$workingFolder/AzureFunctions/app.zip" -Force
+az functionapp deployment source config-zip -g $identityResourceGroup -n $DeploymentOutputs['IDENTITY_FUNCTION_NAME'] --src "$workingFolder/AzureFunctions/app.zip"
+Remove-Item -Force "$workingFolder/AzureFunctions/app.zip"
+Write-Host "Deployed function app"
+Write-Host "##[endgroup]"
 
 Write-Host "##[group]Deploying Identity Web App"
 Push-Location "$webappRoot/AzureWebApps"