However, a goal from Henrik Larsson midway through the second half made for a tense finale and extra time looked on the cards when Lorenzo Amoruso fouled Bobo Balde in the penalty box in the dying seconds of the game.
John Hartson stepped up and drove his shot wide of Stefan Klos’ goal to spare the Italian’s blushes.
It was breath-taking stuff but it really should never have got so close.
In the opening stages Rangers had been everything they weren’t at Parkhead a week ago; direct, positive and willing to pour forward in numbers.
That attitude was reflected in Alex McLeish’s attack-minded formation that saw Ronald de Boer, Michael Mols and Caniggia all start, with Lovenkrands returning to his familiar left wing slot after an unsuccessful stint through the middle at Celtic Park.
De Boer had been sorely missed in that league defeat but looked in the mood to make up for that enforced absence as he shook off not only a calf knock but a host of trailing Celtic defenders as well, as he ran the show from midfield.
A Caniggia overhead kick that sailed narrowly over the crossbar after only three minutes set the tone of what was to follow as Rangers set about their defence of the trophy with much gusto.
A few Celtic set-pieces aside, the first half belonged almost exclusively to the Light Blues.
There is something about playing at Hampden that brings the best out of Lovenkrands. The Dane has not had the best of seasons – by his own admission – but he tore the heart out of Celtic every time he collected the ball and darted down the left flank.
Only a desperate clearance off the goal line by Joos Valgaeren denied Lovenkrands a goal after 15 minutes after he had clipped Jerome Bonnissel’s pass over the goalkeeper but he was instrumental once more when Rangers eventually forged into the lead.
De Boer bisected the Celtic defence with another inch-perfect pass that Lovenkrands rolled across the six-yard box.
In what seemed almost like slow-motion, the ball evaded the lunge of Mols but fell neatly for Caniggia who steered it between the posts and beyond Bobo Balde on the line.
Rangers were consistently finding gaps in the Celtic defence and it wasn’t long before McLeish was on his feet again celebrating another goal for his side.
As the Celtic defence appealed in vain for offside, Lovenkrands latched onto to Mols’ weighted pass and drilled it low past Rab Douglas.
Two goals to the good, the Ibrox side were content to play on the counter-attack and let their visibly tired opponents do most of the running.
It was a risky strategy but Caniggia could have sealed the win when Lovenkrands picked him out at the back post where the veteran Argentine tried to find Mols with a tricky pass rather than shooting for goal.
Celtic seemed to up a gear at this point and Henrik Larsson shot wide from the edge of the box before the Swede headed home at the near post from Alan Thompson’s corner to reduce the deficit just before the hour mark.
Five minutes later and Celtic thought they had equalised. Mikel Arteta scuffed a passback and Larsson released John Hartson who shot low past Stefan Klos.
To Rangers’ mighty relief, the linesman’s flag brought a premature end to Martin O’Neill’s celebrations.
It was nail-biting stuff now and Caniggia had a great chance to extend Rangers lead when he drove a shot across goal that went just wide.
Four minutes later and it was the ex-Dundee man again running through the Celtic defence but he was unable to turn Arteta’s pass beyond Douglas.
Unlike last week’s relatively tame affair, this was turning into a typically frantic Old Firm encounter and only an acrobatic block from Klos denied Larsson from scoring with a copy-cat header from Thompson’s corner.
The last 15 minutes passed by in a blur. Chris Sutton went off on a stretcher after clashing with Balde before Barry Ferguson was floored by a Shaun Maloney free kick that struck him flush on the forehead.
With the tension reaching almost unbearable levels, Neil Lennon was sent off for two bookings in two minutes before Hartson dragged his penalty wide of goal in the last minute as Rangers clung on to land their first trophy of the season.
RANGERS: Klos; Ricksen, Moore, Amoruso, Bonnissel (Ross 64); Caniggia, Arteta (Konterman 78), Ferguson(c); de Boer (Arveladze 86), Mols, Lovenkrands
Subs: McGregor, McCann
Booked: Amoruso (72)
CELTIC: Douglas; Mjallby (Petrov 88), Balde, Valgaeren; Smith (Sylla 65), Lennon, Lambert, Sutton (Maloney 80), Thompson; Hartson, Larsson
Subs: McNamara, Marshall
Booked: Thompson (30), Lennon (85)
Sent off: Lennon (87)
Man of the Match: Claudio Caniggia