diff --git a/homeassistant/backup_restore.py b/homeassistant/backup_restore.py
index 32991dfb2d3..622a473c5c9 100644
--- a/homeassistant/backup_restore.py
+++ b/homeassistant/backup_restore.py
@@ -1,6 +1,7 @@
 """Home Assistant module to handle restoring backups."""
 
 from dataclasses import dataclass
+import hashlib
 import json
 import logging
 from pathlib import Path
@@ -24,6 +25,18 @@ class RestoreBackupFileContent:
     """Definition for restore backup file content."""
 
     backup_file_path: Path
+    password: str | None = None
+
+
+def password_to_key(password: str) -> bytes:
+    """Generate a AES Key from password.
+
+    Matches the implementation in supervisor.backups.utils.password_to_key.
+    """
+    key: bytes = password.encode()
+    for _ in range(100):
+        key = hashlib.sha256(key).digest()
+    return key[:16]
 
 
 def restore_backup_file_content(config_dir: Path) -> RestoreBackupFileContent | None:
@@ -32,7 +45,8 @@ def restore_backup_file_content(config_dir: Path) -> RestoreBackupFileContent |
     try:
         instruction_content = json.loads(instruction_path.read_text(encoding="utf-8"))
         return RestoreBackupFileContent(
-            backup_file_path=Path(instruction_content["path"])
+            backup_file_path=Path(instruction_content["path"]),
+            password=instruction_content.get("password"),
         )
     except (FileNotFoundError, json.JSONDecodeError):
         return None
@@ -54,7 +68,11 @@ def _clear_configuration_directory(config_dir: Path) -> None:
             shutil.rmtree(entrypath)
 
 
-def _extract_backup(config_dir: Path, backup_file_path: Path) -> None:
+def _extract_backup(
+    config_dir: Path,
+    backup_file_path: Path,
+    password: str | None = None,
+) -> None:
     """Extract the backup file to the config directory."""
     with (
         TemporaryDirectory() as tempdir,
@@ -88,22 +106,28 @@ def _extract_backup(config_dir: Path, backup_file_path: Path) -> None:
                 f"homeassistant.tar{'.gz' if backup_meta["compressed"] else ''}",
             ),
             gzip=backup_meta["compressed"],
+            key=password_to_key(password) if password is not None else None,
             mode="r",
         ) as istf:
-            for member in istf.getmembers():
-                if member.name == "data":
-                    continue
-                member.name = member.name.replace("data/", "")
-            _clear_configuration_directory(config_dir)
             istf.extractall(
-                path=config_dir,
-                members=[
-                    member
-                    for member in securetar.secure_path(istf)
-                    if member.name != "data"
-                ],
+                path=Path(
+                    tempdir,
+                    "homeassistant",
+                ),
+                members=securetar.secure_path(istf),
                 filter="fully_trusted",
             )
+            _clear_configuration_directory(config_dir)
+            shutil.copytree(
+                Path(
+                    tempdir,
+                    "homeassistant",
+                    "data",
+                ),
+                config_dir,
+                dirs_exist_ok=True,
+                ignore=shutil.ignore_patterns(*(KEEP_PATHS)),
+            )
 
 
 def restore_backup(config_dir_path: str) -> bool:
@@ -119,7 +143,11 @@ def restore_backup(config_dir_path: str) -> bool:
     backup_file_path = restore_content.backup_file_path
     _LOGGER.info("Restoring %s", backup_file_path)
     try:
-        _extract_backup(config_dir, backup_file_path)
+        _extract_backup(
+            config_dir=config_dir,
+            backup_file_path=backup_file_path,
+            password=restore_content.password,
+        )
     except FileNotFoundError as err:
         raise ValueError(f"Backup file {backup_file_path} does not exist") from err
     _LOGGER.info("Restore complete, restarting")
diff --git a/homeassistant/components/backup/__init__.py b/homeassistant/components/backup/__init__.py
index 26cadb6c7f2..d160b0bd88f 100644
--- a/homeassistant/components/backup/__init__.py
+++ b/homeassistant/components/backup/__init__.py
@@ -1,5 +1,8 @@
 """The Backup integration."""
 
+import voluptuous as vol
+
+from homeassistant.const import CONF_PASSWORD
 from homeassistant.core import HomeAssistant, ServiceCall
 from homeassistant.helpers import config_validation as cv
 from homeassistant.helpers.hassio import is_hassio
@@ -20,6 +23,8 @@ __all__ = [
 
 CONFIG_SCHEMA = cv.empty_config_schema(DOMAIN)
 
+SERVICE_CREATE_SCHEMA = vol.Schema({vol.Optional(CONF_PASSWORD): str})
+
 
 async def async_setup(hass: HomeAssistant, config: ConfigType) -> bool:
     """Set up the Backup integration."""
@@ -45,11 +50,17 @@ async def async_setup(hass: HomeAssistant, config: ConfigType) -> bool:
             folders_included=None,
             name=None,
             on_progress=None,
+            password=call.data.get(CONF_PASSWORD),
         )
         if backup_task := backup_manager.backup_task:
             await backup_task
 
-    hass.services.async_register(DOMAIN, "create", async_handle_create_service)
+    hass.services.async_register(
+        DOMAIN,
+        "create",
+        async_handle_create_service,
+        schema=SERVICE_CREATE_SCHEMA,
+    )
 
     async_register_http_views(hass)
 
diff --git a/homeassistant/components/backup/manager.py b/homeassistant/components/backup/manager.py
index 671edb933ae..b2e353a0c4e 100644
--- a/homeassistant/components/backup/manager.py
+++ b/homeassistant/components/backup/manager.py
@@ -22,7 +22,7 @@ import aiohttp
 from securetar import SecureTarFile, atomic_contents_add
 from typing_extensions import TypeVar
 
-from homeassistant.backup_restore import RESTORE_BACKUP_FILE
+from homeassistant.backup_restore import RESTORE_BACKUP_FILE, password_to_key
 from homeassistant.const import __version__ as HAVERSION
 from homeassistant.core import HomeAssistant, callback
 from homeassistant.exceptions import HomeAssistantError
@@ -173,7 +173,13 @@ class BaseBackupManager(abc.ABC, Generic[_BackupT]):
         self.loaded_platforms = True
 
     @abc.abstractmethod
-    async def async_restore_backup(self, slug: str, **kwargs: Any) -> None:
+    async def async_restore_backup(
+        self,
+        slug: str,
+        *,
+        password: str | None = None,
+        **kwargs: Any,
+    ) -> None:
         """Restore a backup."""
 
     @abc.abstractmethod
@@ -185,6 +191,7 @@ class BaseBackupManager(abc.ABC, Generic[_BackupT]):
         folders_included: list[str] | None,
         name: str | None,
         on_progress: Callable[[BackupProgress], None] | None,
+        password: str | None,
         **kwargs: Any,
     ) -> NewBackup:
         """Initiate generating a backup.
@@ -252,6 +259,7 @@ class BackupManager(BaseBackupManager[Backup]):
                         date=backup.date,
                         slug=backup.slug,
                         name=backup.name,
+                        protected=backup.protected,
                     ),
                 )
                 for agent in self.backup_agents.values()
@@ -284,6 +292,7 @@ class BackupManager(BaseBackupManager[Backup]):
                             date=cast(str, data["date"]),
                             path=backup_path,
                             size=round(backup_path.stat().st_size / 1_048_576, 2),
+                            protected=cast(bool, data.get("protected", False)),
                         )
                         backups[backup.slug] = backup
             except (OSError, TarError, json.JSONDecodeError, KeyError) as err:
@@ -393,6 +402,7 @@ class BackupManager(BaseBackupManager[Backup]):
         folders_included: list[str] | None,
         name: str | None,
         on_progress: Callable[[BackupProgress], None] | None,
+        password: str | None,
         **kwargs: Any,
     ) -> NewBackup:
         """Initiate generating a backup."""
@@ -409,6 +419,7 @@ class BackupManager(BaseBackupManager[Backup]):
                 date_str=date_str,
                 folders_included=folders_included,
                 on_progress=on_progress,
+                password=password,
                 slug=slug,
             ),
             name="backup_manager_create_backup",
@@ -425,6 +436,7 @@ class BackupManager(BaseBackupManager[Backup]):
         date_str: str,
         folders_included: list[str] | None,
         on_progress: Callable[[BackupProgress], None] | None,
+        password: str | None,
         slug: str,
     ) -> Backup:
         """Generate a backup."""
@@ -443,13 +455,16 @@ class BackupManager(BaseBackupManager[Backup]):
                     "version": HAVERSION,
                 },
                 "compressed": True,
+                "protected": password is not None,
             }
+
             tar_file_path = Path(self.backup_dir, f"{backup_data['slug']}.tar")
             size_in_bytes = await self.hass.async_add_executor_job(
                 self._mkdir_and_generate_backup_contents,
                 tar_file_path,
                 backup_data,
                 database_included,
+                password,
             )
             backup = Backup(
                 slug=slug,
@@ -457,6 +472,7 @@ class BackupManager(BaseBackupManager[Backup]):
                 date=date_str,
                 path=tar_file_path,
                 size=round(size_in_bytes / 1_048_576, 2),
+                protected=password is not None,
             )
             if self.loaded_backups:
                 self.backups[slug] = backup
@@ -474,6 +490,7 @@ class BackupManager(BaseBackupManager[Backup]):
         tar_file_path: Path,
         backup_data: dict[str, Any],
         database_included: bool,
+        password: str | None = None,
     ) -> int:
         """Generate backup contents and return the size."""
         if not self.backup_dir.exists():
@@ -495,7 +512,9 @@ class BackupManager(BaseBackupManager[Backup]):
             tar_info.mtime = int(time.time())
             outer_secure_tarfile_tarfile.addfile(tar_info, fileobj=fileobj)
             with outer_secure_tarfile.create_inner_tar(
-                "./homeassistant.tar.gz", gzip=True
+                "./homeassistant.tar.gz",
+                gzip=True,
+                key=password_to_key(password) if password is not None else None,
             ) as core_tar:
                 atomic_contents_add(
                     tar_file=core_tar,
@@ -503,10 +522,15 @@ class BackupManager(BaseBackupManager[Backup]):
                     excludes=excludes,
                     arcname="data",
                 )
-
         return tar_file_path.stat().st_size
 
-    async def async_restore_backup(self, slug: str, **kwargs: Any) -> None:
+    async def async_restore_backup(
+        self,
+        slug: str,
+        *,
+        password: str | None = None,
+        **kwargs: Any,
+    ) -> None:
         """Restore a backup.
 
         This will write the restore information to .HA_RESTORE which
@@ -518,7 +542,7 @@ class BackupManager(BaseBackupManager[Backup]):
         def _write_restore_file() -> None:
             """Write the restore file."""
             Path(self.hass.config.path(RESTORE_BACKUP_FILE)).write_text(
-                json.dumps({"path": backup.path.as_posix()}),
+                json.dumps({"path": backup.path.as_posix(), "password": password}),
                 encoding="utf-8",
             )
 
diff --git a/homeassistant/components/backup/models.py b/homeassistant/components/backup/models.py
index 1007a233923..98fd15c9475 100644
--- a/homeassistant/components/backup/models.py
+++ b/homeassistant/components/backup/models.py
@@ -8,9 +8,10 @@ class BaseBackup:
     """Base backup class."""
 
     date: str
+    name: str
+    protected: bool
     slug: str
     size: float
-    name: str
 
     def as_dict(self) -> dict:
         """Return a dict representation of this backup."""
@@ -26,3 +27,4 @@ class BackupUploadMetadata:
     size: float  # The size of the backup (in bytes)
     name: str  # The name of the backup
     homeassistant: str  # The version of Home Assistant that created the backup
+    protected: bool  # If the backup is protected
diff --git a/homeassistant/components/backup/services.yaml b/homeassistant/components/backup/services.yaml
index 900aa39dd6e..772ed015d3a 100644
--- a/homeassistant/components/backup/services.yaml
+++ b/homeassistant/components/backup/services.yaml
@@ -1 +1,7 @@
 create:
+  fields:
+    password:
+      required: false
+      selector:
+        text:
+          type: password
diff --git a/homeassistant/components/backup/strings.json b/homeassistant/components/backup/strings.json
index 6ad3416b1b9..da75ba08511 100644
--- a/homeassistant/components/backup/strings.json
+++ b/homeassistant/components/backup/strings.json
@@ -2,7 +2,13 @@
   "services": {
     "create": {
       "name": "Create backup",
-      "description": "Creates a new backup."
+      "description": "Creates a new backup.",
+      "fields": {
+        "password": {
+          "name": "[%key:common::config_flow::data::password%]",
+          "description": "Password protect the backup"
+        }
+      }
     }
   }
 }
diff --git a/homeassistant/components/backup/websocket.py b/homeassistant/components/backup/websocket.py
index 375ee4c04ee..e2164a2dbca 100644
--- a/homeassistant/components/backup/websocket.py
+++ b/homeassistant/components/backup/websocket.py
@@ -98,6 +98,7 @@ async def handle_remove(
     {
         vol.Required("type"): "backup/restore",
         vol.Required("slug"): str,
+        vol.Optional("password"): str,
     }
 )
 @websocket_api.async_response
@@ -107,7 +108,10 @@ async def handle_restore(
     msg: dict[str, Any],
 ) -> None:
     """Restore a backup."""
-    await hass.data[DATA_MANAGER].async_restore_backup(msg["slug"])
+    await hass.data[DATA_MANAGER].async_restore_backup(
+        slug=msg["slug"],
+        password=msg.get("password"),
+    )
     connection.send_result(msg["id"])
 
 
@@ -119,6 +123,7 @@ async def handle_restore(
         vol.Optional("database_included", default=True): bool,
         vol.Optional("folders_included"): [str],
         vol.Optional("name"): str,
+        vol.Optional("password"): str,
     }
 )
 @websocket_api.async_response
@@ -138,6 +143,7 @@ async def handle_create(
         folders_included=msg.get("folders_included"),
         name=msg.get("name"),
         on_progress=on_progress,
+        password=msg.get("password"),
     )
     connection.send_result(msg["id"], backup)
 
diff --git a/homeassistant/components/kitchen_sink/backup.py b/homeassistant/components/kitchen_sink/backup.py
index 92d1859dbe6..ffbca276680 100644
--- a/homeassistant/components/kitchen_sink/backup.py
+++ b/homeassistant/components/kitchen_sink/backup.py
@@ -34,6 +34,7 @@ class KitchenSinkBackupAgent(BackupAgent):
             UploadedBackup(
                 id="def456",
                 name="Kitchen sink syncer",
+                protected=False,
                 slug="abc123",
                 size=1234,
                 date="1970-01-01T00:00:00Z",
@@ -63,6 +64,7 @@ class KitchenSinkBackupAgent(BackupAgent):
             UploadedBackup(
                 id=uuid4().hex,
                 name=metadata.name,
+                protected=metadata.protected,
                 slug=metadata.slug,
                 size=metadata.size,
                 date=metadata.date,
diff --git a/tests/components/backup/common.py b/tests/components/backup/common.py
index 2af5c76236f..18f9f28520d 100644
--- a/tests/components/backup/common.py
+++ b/tests/components/backup/common.py
@@ -20,6 +20,7 @@ TEST_BACKUP = Backup(
     date="1970-01-01T00:00:00.000Z",
     path=Path("abc123.tar"),
     size=0.0,
+    protected=False,
 )
 
 
@@ -49,10 +50,11 @@ class BackupAgentTest(BackupAgent):
         return [
             UploadedBackup(
                 id="abc123",
-                name="Test",
-                slug="abc123",
-                size=13.37,
                 date="1970-01-01T00:00:00Z",
+                name="Test",
+                protected=False,
+                size=13.37,
+                slug="abc123",
             )
         ]
 
diff --git a/tests/components/backup/snapshots/test_websocket.ambr b/tests/components/backup/snapshots/test_websocket.ambr
index 2dc35469778..2adaafc5060 100644
--- a/tests/components/backup/snapshots/test_websocket.ambr
+++ b/tests/components/backup/snapshots/test_websocket.ambr
@@ -76,6 +76,7 @@
         'date': '1970-01-01T00:00:00Z',
         'id': 'abc123',
         'name': 'Test',
+        'protected': False,
         'size': 13.37,
         'slug': 'abc123',
       }),
@@ -93,6 +94,7 @@
         'date': '1970-01-01T00:00:00Z',
         'id': 'abc123',
         'name': 'Test',
+        'protected': False,
         'size': 13.37,
         'slug': 'abc123',
       }),
@@ -353,6 +355,7 @@
         'date': '1970-01-01T00:00:00.000Z',
         'name': 'Test',
         'path': 'abc123.tar',
+        'protected': False,
         'size': 0.0,
         'slug': 'abc123',
       }),
@@ -371,7 +374,7 @@
     'type': 'result',
   })
 # ---
-# name: test_generate[with_hassio]
+# name: test_generate[with_hassio-None]
   dict({
     'error': dict({
       'code': 'unknown_command',
@@ -382,7 +385,29 @@
     'type': 'result',
   })
 # ---
-# name: test_generate[without_hassio]
+# name: test_generate[with_hassio-data1]
+  dict({
+    'error': dict({
+      'code': 'unknown_command',
+      'message': 'Unknown command.',
+    }),
+    'id': 1,
+    'success': False,
+    'type': 'result',
+  })
+# ---
+# name: test_generate[with_hassio-data2]
+  dict({
+    'error': dict({
+      'code': 'unknown_command',
+      'message': 'Unknown command.',
+    }),
+    'id': 1,
+    'success': False,
+    'type': 'result',
+  })
+# ---
+# name: test_generate[without_hassio-None]
   dict({
     'id': 1,
     'result': dict({
@@ -392,7 +417,49 @@
     'type': 'result',
   })
 # ---
-# name: test_generate[without_hassio].1
+# name: test_generate[without_hassio-None].1
+  dict({
+    'event': dict({
+      'done': True,
+      'stage': None,
+      'success': True,
+    }),
+    'id': 1,
+    'type': 'event',
+  })
+# ---
+# name: test_generate[without_hassio-data1]
+  dict({
+    'id': 1,
+    'result': dict({
+      'slug': '27f5c632',
+    }),
+    'success': True,
+    'type': 'result',
+  })
+# ---
+# name: test_generate[without_hassio-data1].1
+  dict({
+    'event': dict({
+      'done': True,
+      'stage': None,
+      'success': True,
+    }),
+    'id': 1,
+    'type': 'event',
+  })
+# ---
+# name: test_generate[without_hassio-data2]
+  dict({
+    'id': 1,
+    'result': dict({
+      'slug': '27f5c632',
+    }),
+    'success': True,
+    'type': 'result',
+  })
+# ---
+# name: test_generate[without_hassio-data2].1
   dict({
     'event': dict({
       'done': True,
@@ -444,6 +511,7 @@
           'date': '1970-01-01T00:00:00.000Z',
           'name': 'Test',
           'path': 'abc123.tar',
+          'protected': False,
           'size': 0.0,
           'slug': 'abc123',
         }),
diff --git a/tests/components/backup/test_init.py b/tests/components/backup/test_init.py
index e064939d618..ad55c4cc0cb 100644
--- a/tests/components/backup/test_init.py
+++ b/tests/components/backup/test_init.py
@@ -1,5 +1,6 @@
 """Tests for the Backup integration."""
 
+from typing import Any
 from unittest.mock import patch
 
 import pytest
@@ -26,8 +27,10 @@ async def test_setup_with_hassio(
     ) in caplog.text
 
 
+@pytest.mark.parametrize("service_data", [None, {}, {"password": "abc123"}])
 async def test_create_service(
     hass: HomeAssistant,
+    service_data: dict[str, Any] | None,
 ) -> None:
     """Test generate backup."""
     await setup_backup_integration(hass)
@@ -39,6 +42,7 @@ async def test_create_service(
             DOMAIN,
             "create",
             blocking=True,
+            service_data=service_data,
         )
 
     assert generate_backup.called
diff --git a/tests/components/backup/test_manager.py b/tests/components/backup/test_manager.py
index 5b3396291ad..a15002d217e 100644
--- a/tests/components/backup/test_manager.py
+++ b/tests/components/backup/test_manager.py
@@ -38,6 +38,7 @@ async def _mock_backup_generation(
     *,
     database_included: bool = True,
     name: str | None = "Core 2025.1.0",
+    password: str | None = None,
 ) -> None:
     """Mock backup generator."""
 
@@ -54,6 +55,7 @@ async def _mock_backup_generation(
         folders_included=[],
         name=name,
         on_progress=on_progress,
+        password=password,
     )
     assert manager.backup_task is not None
     assert progress == []
@@ -73,6 +75,7 @@ async def _mock_backup_generation(
             "version": "2025.1.0",
         },
         "name": name,
+        "protected": bool(password),
         "slug": ANY,
         "type": "partial",
     }
@@ -199,6 +202,7 @@ async def test_async_create_backup_when_backing_up(hass: HomeAssistant) -> None:
             folders_included=[],
             name=None,
             on_progress=None,
+            password=None,
         )
     event.set()
 
@@ -206,7 +210,12 @@ async def test_async_create_backup_when_backing_up(hass: HomeAssistant) -> None:
 @pytest.mark.usefixtures("mock_backup_generation")
 @pytest.mark.parametrize(
     "params",
-    [{}, {"database_included": True, "name": "abc123"}, {"database_included": False}],
+    [
+        {},
+        {"database_included": True, "name": "abc123"},
+        {"database_included": False},
+        {"password": "abc123"},
+    ],
 )
 async def test_async_create_backup(
     hass: HomeAssistant,
@@ -228,6 +237,10 @@ async def test_async_create_backup(
     assert "Loaded 0 platforms" in caplog.text
     assert "Loaded 0 agents" in caplog.text
 
+    assert len(manager.backups) == 1
+    backup = list(manager.backups.values())[0]
+    assert backup.protected is bool(params.get("password"))
+
 
 async def test_loading_platforms(
     hass: HomeAssistant,
@@ -351,6 +364,7 @@ async def test_syncing_backup(
             date=backup.date,
             homeassistant="2025.1.0",
             name=backup.name,
+            protected=backup.protected,
             size=backup.size,
             slug=backup.slug,
         )
@@ -415,6 +429,7 @@ async def test_syncing_backup_with_exception(
             date=backup.date,
             homeassistant="2025.1.0",
             name=backup.name,
+            protected=backup.protected,
             size=backup.size,
             slug=backup.slug,
         )
@@ -600,7 +615,32 @@ async def test_async_trigger_restore(
         patch("homeassistant.core.ServiceRegistry.async_call") as mocked_service_call,
     ):
         await manager.async_restore_backup(TEST_BACKUP.slug)
-        assert mocked_write_text.call_args[0][0] == '{"path": "abc123.tar"}'
+        assert (
+            mocked_write_text.call_args[0][0]
+            == '{"path": "abc123.tar", "password": null}'
+        )
+        assert mocked_service_call.called
+
+
+async def test_async_trigger_restore_with_password(
+    hass: HomeAssistant,
+    caplog: pytest.LogCaptureFixture,
+) -> None:
+    """Test trigger restore."""
+    manager = BackupManager(hass)
+    manager.loaded_backups = True
+    manager.backups = {TEST_BACKUP.slug: TEST_BACKUP}
+
+    with (
+        patch("pathlib.Path.exists", return_value=True),
+        patch("pathlib.Path.write_text") as mocked_write_text,
+        patch("homeassistant.core.ServiceRegistry.async_call") as mocked_service_call,
+    ):
+        await manager.async_restore_backup(slug=TEST_BACKUP.slug, password="abc123")
+        assert (
+            mocked_write_text.call_args[0][0]
+            == '{"path": "abc123.tar", "password": "abc123"}'
+        )
         assert mocked_service_call.called
 
 
diff --git a/tests/components/backup/test_websocket.py b/tests/components/backup/test_websocket.py
index 5fee1870c10..8e130b1bceb 100644
--- a/tests/components/backup/test_websocket.py
+++ b/tests/components/backup/test_websocket.py
@@ -1,6 +1,7 @@
 """Tests for the Backup integration."""
 
 from pathlib import Path
+from typing import Any
 from unittest.mock import ANY, AsyncMock, patch
 
 from freezegun.api import FrozenDateTimeFactory
@@ -126,6 +127,14 @@ async def test_remove(
         assert await client.receive_json() == snapshot
 
 
+@pytest.mark.parametrize(
+    "data",
+    [
+        None,
+        {},
+        {"password": "abc123"},
+    ],
+)
 @pytest.mark.parametrize(
     ("with_hassio", "number_of_messages"),
     [
@@ -137,6 +146,7 @@ async def test_remove(
 async def test_generate(
     hass: HomeAssistant,
     hass_ws_client: WebSocketGenerator,
+    data: dict[str, Any] | None,
     freezer: FrozenDateTimeFactory,
     snapshot: SnapshotAssertion,
     with_hassio: bool,
@@ -149,7 +159,7 @@ async def test_generate(
     freezer.move_to("2024-11-13 12:01:00+01:00")
     await hass.async_block_till_done()
 
-    await client.send_json_auto_id({"type": "backup/generate"})
+    await client.send_json_auto_id({"type": "backup/generate", **(data or {})})
     for _ in range(number_of_messages):
         assert await client.receive_json() == snapshot
 
@@ -203,6 +213,7 @@ async def test_generate_without_hassio(
                 "folders_included": None,
                 "name": None,
                 "on_progress": ANY,
+                "password": None,
             }
             | expected_extra_call_params
         )
diff --git a/tests/test_backup_restore.py b/tests/test_backup_restore.py
index 44a05c0540e..7f69d4db728 100644
--- a/tests/test_backup_restore.py
+++ b/tests/test_backup_restore.py
@@ -19,7 +19,23 @@ from .common import get_test_config_dir
         (
             None,
             '{"path": "test"}',
-            backup_restore.RestoreBackupFileContent(backup_file_path=Path("test")),
+            backup_restore.RestoreBackupFileContent(
+                backup_file_path=Path("test"), password=None
+            ),
+        ),
+        (
+            None,
+            '{"path": "test", "password": "psw"}',
+            backup_restore.RestoreBackupFileContent(
+                backup_file_path=Path("test"), password="psw"
+            ),
+        ),
+        (
+            None,
+            '{"path": "test", "password": null}',
+            backup_restore.RestoreBackupFileContent(
+                backup_file_path=Path("test"), password=None
+            ),
         ),
     ],
 )
@@ -155,15 +171,17 @@ def test_removal_of_current_configuration_when_restoring() -> None:
             return_value=[x["path"] for x in mock_config_dir],
         ),
         mock.patch("pathlib.Path.unlink") as unlink_mock,
-        mock.patch("shutil.rmtree") as rmtreemock,
+        mock.patch("shutil.copytree") as copytree_mock,
+        mock.patch("shutil.rmtree") as rmtree_mock,
     ):
         assert backup_restore.restore_backup(config_dir) is True
         assert unlink_mock.call_count == 2
+        assert copytree_mock.call_count == 1
         assert (
-            rmtreemock.call_count == 1
+            rmtree_mock.call_count == 1
         )  # We have 2 directories in the config directory, but backups is kept
 
-        removed_directories = {Path(call.args[0]) for call in rmtreemock.mock_calls}
+        removed_directories = {Path(call.args[0]) for call in rmtree_mock.mock_calls}
         assert removed_directories == {Path(config_dir, "www")}
 
 
@@ -177,8 +195,8 @@ def test_extracting_the_contents_of_a_backup_file() -> None:
 
     getmembers_mock = mock.MagicMock(
         return_value=[
+            tarfile.TarInfo(name="../data/test"),
             tarfile.TarInfo(name="data"),
-            tarfile.TarInfo(name="data/../test"),
             tarfile.TarInfo(name="data/.HA_VERSION"),
             tarfile.TarInfo(name="data/.storage"),
             tarfile.TarInfo(name="data/www"),
@@ -190,7 +208,7 @@ def test_extracting_the_contents_of_a_backup_file() -> None:
         mock.patch(
             "homeassistant.backup_restore.restore_backup_file_content",
             return_value=backup_restore.RestoreBackupFileContent(
-                backup_file_path=backup_file_path
+                backup_file_path=backup_file_path,
             ),
         ),
         mock.patch(
@@ -205,11 +223,37 @@ def test_extracting_the_contents_of_a_backup_file() -> None:
         mock.patch("pathlib.Path.read_text", _patched_path_read_text),
         mock.patch("pathlib.Path.is_file", return_value=False),
         mock.patch("pathlib.Path.iterdir", return_value=[]),
+        mock.patch("shutil.copytree"),
     ):
         assert backup_restore.restore_backup(config_dir) is True
-        assert getmembers_mock.call_count == 1
         assert extractall_mock.call_count == 2
 
         assert {
             member.name for member in extractall_mock.mock_calls[-1].kwargs["members"]
-        } == {".HA_VERSION", ".storage", "www"}
+        } == {"data", "data/.HA_VERSION", "data/.storage", "data/www"}
+
+
+@pytest.mark.parametrize(
+    ("password", "expected"),
+    [
+        ("test", b"\xf0\x9b\xb9\x1f\xdc,\xff\xd5x\xd6\xd6\x8fz\x19.\x0f"),
+        ("lorem ipsum...", b"#\xe0\xfc\xe0\xdb?_\x1f,$\rQ\xf4\xf5\xd8\xfb"),
+    ],
+)
+def test_pw_to_key(password: str | None, expected: bytes | None) -> None:
+    """Test password to key conversion."""
+    assert backup_restore.password_to_key(password) == expected
+
+
+@pytest.mark.parametrize(
+    ("password", "expected"),
+    [
+        (None, None),
+        ("test", b"\xf0\x9b\xb9\x1f\xdc,\xff\xd5x\xd6\xd6\x8fz\x19.\x0f"),
+        ("lorem ipsum...", b"#\xe0\xfc\xe0\xdb?_\x1f,$\rQ\xf4\xf5\xd8\xfb"),
+    ],
+)
+def test_pw_to_key_none(password: str | None, expected: bytes | None) -> None:
+    """Test password to key conversion."""
+    with pytest.raises(AttributeError):
+        backup_restore.password_to_key(None)