Kubernetes on Rancher fails; kills ssh: 'PTY allocation request failed on channel 0'

I installed RancherOS (v1.0.0) on three physical machines. Everything seemed to be working well until I tried to run Kubernetes. Now I’m unable to ssh into any of the nodes:

$ ssh {{ any RancherOS node }}
PTY allocation request failed on channel 0

The web management server still works.

The only way I’m able to regain connectivity via ssh is to reboot the nodes.

This Stackoverflow answer suggests that the cause is probably an application leaking processes and saturating the 256 terminal limit.

Has anyone else experienced this? Is there a workaround? Anything I should check/tweak?

I have the same issue, RancherOS v1.0.0 and looks like Rancher Server v1.5.5

A few minutes after rebooting (after activating Kubernetes on the hosts), login is no longer possible and hard reboot needed.