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This paper presents Policy-based Federation (PBF) architecture for interworked Future Internet Virtualized Infrastructures (VIs). Each VI is an individually managed autonomous domain. Users may request slices of virtual resources across the federation, managed and controlled via inter-domain policies that abide by agreed upon federated SLAs. The key component of our PBF architecture is a Policy Service, which provides support for intra-domain policies (Obligation, Authorization, Role-Based Access Control) and for inter-domain Delegation policies. Delegation policies reserve resources in remote domains, update the number of resources exchanged, set alien domain obligations for cross-domain resource provisioning and define the exchange of internal domain information through the execution of remote semantic queries. Key to the architecture is the PBF Policy Ontology that specifies common federation concepts within the context of a user slice and the PBF services that trigger management actions. A prototype of the proposed architecture was developed and deployed in a European Future Internet federated testbed.