If you are trying to install the HyperV Role on a Windows Server VM in Azure and get this error:

It is likely that you are running on an Azure VM that does not support “Nested Virtualization”.

To add the HyperV Role on a Windows Server VM in you need “Nested Virtualization”.

Dv3 and Ev3 VM sizes support “Nested Virtualization”.

For more info see

https://azure.microsoft.com/en-us/blog/nested-virtualization-in-azure/

https://azure.microsoft.com/en-us/blog/introducing-the-new-dv3-and-ev3-vm-sizes/

https://learn.microsoft.com/en-us/azure/virtual-machines/dcv3-series

UPDATE 4/18/2023

As of 4/18/2023 I can report that using Standard D8s V3 size VMs, the Windows Server 2019 and the Windows Server 2022 images available on Azure caused the above issue, even with compliant Dv3 and Ev3 VM sizes (Tested in East US 2), whereas the Windows Server 2016 image did not.

Terry