azure-functions-host: Azure AD authentication for Application Insights is not working in Azure Function

I am getting the below error when I am trying to use Azure AD authentication for Application Insights in my Azure Function. Microsoft.ApplicationInsights: The provided tokenCredential must inherit Azure.Core.TokenCredential (Parameter 'tokenCredential'). I am getting this error both in my local machine and also in my azure portal as a Functions runtime error.

Investigative information

• Timestamp: 2023-05-04T08:00:00Z
• Function App version: 4
• Function App name: func-tpgcp-mail-dev-eu
• Region: North Europe

Repro steps

Here is the code that I wrote in my Startup.Configure:

var managedIdentityCredential = new ManagedIdentityCredential();
services.Configure<TelemetryConfiguration>(config => config.SetAzureTokenCredential(managedIdentityCredential));
services.AddApplicationInsightsTelemetryWorkerService();

Expected behavior

The function app can use its managed identity to authenticate and sends telemetry data to application insights.

Actual behavior

As I said in the description I am getting an error that says ManagedIdentityCredential is not inherited from the TokenCredential class.

Known workarounds

Nothing came to my mind.

Related information

After some investigation, I realized that ReflectionCredentialEnvelope uses reflection to load the TokenCredential type and then uses the type to check if the passed credential object inherits from that type or not. Then I took a look at the loaded modules in the application on my local machine and saw that the Azure.Core.dll is loaded twice with different versions:

Also here are all packages that I used in my app function:

<ItemGroup>
    <PackageReference Include="Azure.Core" Version="1.31.0" />
    <PackageReference Include="Azure.Identity" Version="1.8.2" />
    <PackageReference Include="Azure.Messaging.ServiceBus" Version="7.13.1" />
    <PackageReference Include="Azure.Storage.Blobs" Version="12.16.0" />
    <PackageReference Include="Microsoft.ApplicationInsights.WorkerService" Version="2.21.0" />
    <PackageReference Include="Microsoft.Azure.Cosmos" Version="3.33.0" />
    <PackageReference Include="Microsoft.Azure.Functions.Extensions" Version="1.1.0" />
    <PackageReference Include="Microsoft.Azure.WebJobs.Extensions.CosmosDB" Version="4.2.0" />
    <PackageReference Include="Microsoft.Azure.WebJobs.Extensions.EventGrid" Version="3.2.1" />
    <PackageReference Include="Microsoft.Azure.WebJobs.Extensions.ServiceBus" Version="5.9.0" />
    <PackageReference Include="Microsoft.Azure.WebJobs.Extensions.Storage" Version="5.1.2" />
    <PackageReference Include="Microsoft.Graph" Version="5.8.0" />
    <PackageReference Include="Microsoft.Identity.Client" Version="4.53.0" />
    <PackageReference Include="Microsoft.NET.Sdk.Functions" Version="4.2.0" />
  </ItemGroup>