But they were hugely fortunate to come out on top given Wallace nodded over the line just six minutes into the contest and never saw his effort count.
It was a massive call which referee Willie Collum missed completely – and one which ultimately cost the Ibrox outfit as they were beaten by Joe Ledley’s second-half strike.
Manager Ally McCoist will rightly be furious at the whistler’s failure to see Wallace’s counter, which was then pushed back on to the post by Fraser Forster.
And he’ll never know just how this one might have panned out had the early attempt been spotted and allowed to stand.
Now Gers need to pick themselves up and fight hard to reclaim an advantage in the league which once stood at 15 points.
They resume their bid for a fourth successive title on Monday when third-top Motherwell come to Govan.
On the evidence of this game, there is little to pick between Glasgow’s big two and McCoist will be keen to drum that fact into his players.
Celtic will argue they deserved to come out on top here and they perhaps did for being more creative in the final third.
On the other hand, Gers made enough openings themselves – albeit not many overall – to have left for home with a win of their own.
Many expected McCoist to go with a defensive formation and despite reports of that before the match, his team selection was very positive.
Sone Aluko returned to the right side of midfield and two strikers were used rather than one in the shape of Nikica Jelavic and Kyle Lafferty.
Kirk Broadfoot also came into the team for the injured Steven Whittaker, while Kyle Bartley filled in as Dorin Goian served a suspension following his red card at St Mirren.
As it always does, the derby began with a pulsating atmosphere inside the ground and it was the hosts who began on the front foot.
Scott Brown tried his luck with a cheeky backheel flick in mid-air but Carlos Bocanegra headed away before Lee McCulloch cleared completely.
Back came Rangers and with their first chance, they were denied the opener in hugely controversial circumstances.
Aluko’s presence on the right caused all sorts of problems for the home team and when he crossed in at the second attempt, he found Wallace at the back post.
Having scored in Paisley at the weekend, he headed over the line again before Fraser Forster palmed clear.
And while it was only really Wallace and Jelavic who appealed half-heartedly, TV replays showed the whole ball had crossed over and it should have been 1-0.
On the whole, Celtic were the more offensive team initially and they soon had the ball in the net themselves only to find the goal disallowed for offside.
It was Georgios Samaras who converted after McGregor got his hands to a fierce Gary Hooper effort but couldn’t hold it.
The Greek was ruled to have moved too early by linesman Graham Chambers and he was correct as he was a yard beyond the last man when the initial shot was hit.
James Forrest was next to have a go with a chip but he was too obvious and McGregor held his attempt before Jelavic drilled over as Rangers responded.
Bocanegra should then have given Gers a lead when he latched on to the Croat’s knockdown but he somehow put the ball over the bar with his knee from two yards.
The game was swinging from end to end and in wet conditions, it was becoming increasingly apparent that driving from distance wasn’t a bad idea.
McGregor had to get down well to stop another attempt from Hooper, while Forrest also cracked one just over the upright.
Jelavic was also denied from a free kick after he was brought down by Thomas Rogne, with his curler cannoning off the wall, and that meant it remained goalless at the break.
Both sides were unchanged at the restart and heartened by their first-half showing, Rangers started the second brightly at first.
For all that, it took crucial intervention from Bocanegra to keep out Samaras and McGregor had to tip over a dipping Forrest piledriver.
And with pressure mounting, Celtic took a lead after 52 minutes when Joe Ledley rose beyond Broadfoot to nod Charlie Mulgrew’s corner in from close range.
Going behind clearly knocked the Light Blues and buoyed by the goal which broke the deadlock, the hosts pushed for a second with Scott Brown clearing the bar.
Gers offered little by way of reply, with moves upfield too often breaking down due to a poor final ball rather than because of good defending by the Parkhead team.
And as time went on it was Celtic who were growing in confidence, with Victor Wanyama not far away in their next attack.
McCoist felt fresh legs were needed to change things and he threw on Gregg Wylde for Aluko, who was becoming less involved as play progressed.
Nevertheless, Mulgrew tested McGregor with a smart free kick which the keeper had to push behind.
In response, Jelavic tried an acrobatic scissor kick which was always going to be hard to get on target before finding the mark with another but not getting enough power on it.
There was a lull in play as McCulloch and Beram Kayal collided in a tackle and a lengthy pause was required for the latter to be taken off on a stretcher.
But it did little for Gers and with time beginning to ebb away, they were losing their grasp on the SPL advantage they held going into the game.
With five minutes of injury time added on after Kayal’s departure, there was a last opportunity for McCoist’s men to level.
But they couldn’t deliver when they had to and now they must dig deep and show the character that made them champions in recent seasons.
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