The prevalence of Internet of Things (IoTs) allows heterogeneous embedded smart devices to collaboratively provide intelligent services with or without human intervention. While leveraging the large-scale IoT-based applications like Smart Gird and Smart Cities, IoT also incurs more concerns on privacy and security. Among the top security challenges that IoTs face is that access authorization is critical in resource and information protection over IoTs. Traditional access control approaches, like Access Control Lists (ACL), Role-based Access Control (RBAC) and Attribute-based Access Control (ABAC), are not able to provide a scalable, manageable and efficient mechanisms to meet requirement of IoT systems. The extraordinary large number of nodes, heterogeneity as well as dynamicity, necessitate more fine-grained, lightweight mechanisms for IoT devices. In this paper, a federated capability-based access control (FedCAC) framework is proposed to enable an effective access control processes to devices, services and information in large scale IoT systems. The federated capability delegation mechanism, based on a propagation tree, is illustrated for access permission propagation. An identity-based capability token management strategy is presented, which involves registering, propagation and revocation of the access authorization. Through delegating centralized authorization decision-making policy to local domain delegator, the access authorization process is locally conducted on the service provider that integrates situational awareness (SAW) and customized contextual conditions. Implemented and tested on both resources-constrained devices, like smart sensors and Raspberry PI, and non-resource-constrained devices, like laptops and smart phones, our experimental results demonstrate the feasibility of the proposed FedCAC approach to offer a scalable, lightweight and fine-grained access control solution to IoT systems connected to a system network.