While Internet of Things (IoT) technology has been widely recognized as an essential part of Smart Cities, it also brings new challenges in terms of privacy and security. Access control (AC) is among the top security concerns, which is critical in resource and information protection over IoT devices. 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 mechanism to meet the requirements of IoT systems. Another weakness in today’s AC is the centralized authorization server, which can cause a performance bottleneck or be the single point of failure. Inspired by the smart contract on top of a blockchain protocol, this paper proposes BlendCAC, which is a decentralized, federated capability-based AC mechanism to enable effective protection for devices, services and information in large-scale IoT systems. A federated capability-based delegation model (FCDM) is introduced to support hierarchical and multi-hop delegation. The mechanism for delegate authorization and revocation is explored. A robust identity-based capability token management strategy is proposed, which takes advantage of the smart contract for registration, propagation, and revocation of the access authorization. A proof-of-concept prototype has been implemented on both resources-constrained devices (i.e., Raspberry PI nodes) and more powerful computing devices (i.e., laptops) and tested on a local private blockchain network. The experimental results demonstrate the feasibility of the BlendCAC to offer a decentralized, scalable, lightweight and fine-grained AC solution for IoT systems.