The result was a sore one to take for a Gers side which had won 4-2 against their Glasgow rivals back in August.
They had gone into the game protecting a 27-game unbeaten run domestically at home which stretched back almost 15 months.
But they couldn’t level after falling behind and lost at Ibrox for the first time against a Scottish team since Hibs won 1-0 in October 2007.
Walter Smith sprung a surprise when he named his team before the game by including Charlie Adam on the left side of midfield.
Otherwise, it was the same 11 that turned out against Hibs last weekend and that meant 18-goal Kris Boyd played against Celtic for the first time in over a year and a half.
In a pulsating atmosphere typical of an Old Firm clash, it was Celtic who had the first chance but Barry Robson headed Koki Mizuno’s free kick well over.
Back came Rangers, with Steven Davis having one effort blocked then firing another wide after good work by Boyd.
As the ball flashed away from goal, there were big claims for a penalty made by home supporters as it seemed the ball had struck Gary Caldwell’s hand when he got in its way.
There was a little uncertainty in the away defence when Adam swung a deep cross in and Lee Naylor headed behind but the first corner of the match came to nothing.
Celtic made a lot of the early running and it was clear they were keen to avenge the 4-2 win Gers enjoyed at Parkhead four months ago.
But Smith’s men rallied and Kenny Miller turned Andreas Hinkel really well before setting up Boyd, who Caldwell had to get to quickly to block.
The hosts had the ball in the net after 10 minutes when Artur Boruc flapped at Davis’ corner but the goal was ruled out after the keeper appeared to be fouled.
Celtic’s response was positive and David Weir was just sharp enough to stop Scott Brown advancing further than the edge of the area.
The game was swinging from end to end and Miller won another corner but again Rangers couldn’t make the most of it.
They were yet to get a grip of things and it seemed the heavily-watered pitch was playing a part in that.
But the Light Blues did threaten to find their rhythm as the first half went on, with Pedro Mendes setting up Miller well and the striker coming close with a shot from the left.
Georgios Samaras tried his luck at the other end but he dragged his shot well wide with a poor attempt.
Rangers were starting to play better football and a slick move only ended when Barry Ferguson’s shot was charged down and ran on to Boruc.
Mendes also had a go but there was sadly no repeat of his blockbuster first goal for the club four months ago and he fired well over from 20 yards.
The home side was having the better chances and Miller drove towards goal again but was just off target once more.
Temperatures began to rise as a series of decisions which should probably have gone Rangers’ way weren’t given by referee Craig Thomson.
That ensured the whistler was roundly booed off at half-time with the sides level but Gers unfortunate not to be ahead.
The teams emerged for the restart with no changes made by Gers, a relative surprise given that Adam was on a yellow card and looking likely to be replaced.
Hinkel did come off, however, in a straight swap for Mark Wilson after the German took a face knock before the break.
Straight away there was more controversy when Caldwell clearly took Miller’s heels away from him but no foul was given.
Seconds later, Boyd was clean through on goal thanks to Ferguson’s pass but Boruc stood up well and saved.
Caldwell again pulled Miller down and this time it was a foul, with the defender getting the caution he should have received earlier.
That gave Rangers a great chance to score from 20 yards but the wall stood up well and stopped Boyd’s drive from the free kick before Whittaker’s effort was deflected behind.
Smith’s team had started the second period fairly well but then they were hit with a sucker punch as Celtic charged upfield and opened the scoring.
McDonald got the goal, shooting on the turn with a half volley and giving Allan McGregor no chance.
With the team that had struck first in each of the last seven Old Firm games going on to win, the signs were ominous for Gers.
They threw on Kyle Lafferty for Adam as they tried to play their way back into the match with a third of it still remaining.
But they couldn’t settle and the frustration of home fans was becoming clear as their team struggled to come back.
Finally Rangers began to force the issue and Celtic started to sit deeper and deeper in their own half.
They took the injured Whittaker off and put Nacho Novo on in his place as they tried to adopt a more attacking look.
But the hosts couldn’t find a way to test Boruc and while they had more possession, there was no killer touch up front.
Time was getting the better of Rangers and with 10 minutes to go, they seemed to have run out of ideas.
It seemed they might have lost any chance of a point too when Samaras sneaked in at the back post to meet Paul Hartley’s free kick but McGregor saved at point-blank range.
Rangers tried everything they could to salvage a draw but they just didn’t have it in them and now they face an uphill task as they bid to claim the championship.