Turn the Instant Pot to sauté mode and add olive oil.
Once hot, add chopped onion and sauté for 2-3 minutes until translucent.
Add minced garlic and cook for 30 seconds until fragrant.
Add dry penne pasta to the pot and pour in chicken broth, water, and diced tomatoes with their juice.
Sprinkle dried Italian seasoning, salt, and black pepper over the mixture.
Do not stir. Secure the Instant Pot lid and set the valve to sealing.
Cook on high pressure for 5 minutes.
When cooking is complete, perform a quick release by carefully turning the valve to venting.
Open the lid and stir the pasta well to combine all ingredients.
Add shredded mozzarella and grated Parmesan cheese, stirring until melted and creamy.
Serve immediately, garnished with fresh basil leaves.