diff --git a/changelogs/fragments/71609-is_string-vault.yml b/changelogs/fragments/71609-is_string-vault.yml
new file mode 100644
index 00000000000..89ddd91913e
--- /dev/null
+++ b/changelogs/fragments/71609-is_string-vault.yml
@@ -0,0 +1,3 @@
+bugfixes:
+- is_string/vault - Ensure the is_string helper properly identifies AnsibleVaultEncryptedUnicode
+  as a string (https://github.com/ansible/ansible/pull/71609)
diff --git a/lib/ansible/module_utils/common/collections.py b/lib/ansible/module_utils/common/collections.py
index 78f8bf3a296..1b120b8d544 100644
--- a/lib/ansible/module_utils/common/collections.py
+++ b/lib/ansible/module_utils/common/collections.py
@@ -67,7 +67,8 @@ class ImmutableDict(Hashable, Mapping):
 
 def is_string(seq):
     """Identify whether the input has a string-like type (inclding bytes)."""
-    return isinstance(seq, (text_type, binary_type))
+    # AnsibleVaultEncryptedUnicode inherits from Sequence, but is expected to be a string like object
+    return isinstance(seq, (text_type, binary_type)) or getattr(seq, '__ENCRYPTED__', False)
 
 
 def is_iterable(seq, include_strings=False):
diff --git a/lib/ansible/module_utils/common/json.py b/lib/ansible/module_utils/common/json.py
index 3ac9eecf2b4..866a89663b0 100644
--- a/lib/ansible/module_utils/common/json.py
+++ b/lib/ansible/module_utils/common/json.py
@@ -31,7 +31,7 @@ def _preprocess_unsafe_encode(value):
     """
     if _is_unsafe(value):
         value = {'__ansible_unsafe': to_text(value, errors='surrogate_or_strict', nonstring='strict')}
-    elif is_sequence(value) and not _is_vault(value):
+    elif is_sequence(value):
         value = [_preprocess_unsafe_encode(v) for v in value]
     elif isinstance(value, Mapping):
         value = dict((k, _preprocess_unsafe_encode(v)) for k, v in value.items())
diff --git a/test/units/module_utils/common/test_collections.py b/test/units/module_utils/common/test_collections.py
index eb6e376a2cd..95b2a402f29 100644
--- a/test/units/module_utils/common/test_collections.py
+++ b/test/units/module_utils/common/test_collections.py
@@ -35,8 +35,21 @@ class IterableStub:
         return IteratorStub()
 
 
+class FakeAnsibleVaultEncryptedUnicode(Sequence):
+    __ENCRYPTED__ = True
+
+    def __init__(self, data):
+        self.data = data
+
+    def __getitem__(self, index):
+        return self.data[index]
+
+    def __len__(self):
+        return len(self.data)
+
+
 TEST_STRINGS = u'he', u'Україна', u'Česká republika'
-TEST_STRINGS = TEST_STRINGS + tuple(s.encode('utf-8') for s in TEST_STRINGS)
+TEST_STRINGS = TEST_STRINGS + tuple(s.encode('utf-8') for s in TEST_STRINGS) + (FakeAnsibleVaultEncryptedUnicode(u'foo'),)
 
 TEST_ITEMS_NON_SEQUENCES = (
     {}, object(), frozenset(),