Techniques for deduplicating a backup stream with ACL data embedded therein are described. According to one embodiment, a storage system receives a backup stream from a client, where the backup stream includes multiple data streams to be stored in the storage system. Each data stream represents a file or a directory of one or more files of a file system associated with the client. The storage system is to scan the backup stream to recognize an access control list (ACL) marker associated with at least one of the data streams, where the ACL marker identifies ACL data representing an ACL of the at least one data stream. The storage system is to chunk using a predetermined chunking algorithm the ACL data into a plurality of ACL data chunks to be stored in the storage system in a deduplicated manner.