Ange Postecoglou's contenders, desperate to wrestle the crown off their bitter rivals after last season's nightmare, moved six points clear of Giovanni van Bronckhorst's side with six games remaining. The challengers can almost taste the victory champagne after a seismic win.
The match was overshadowed by ugly scenes at the start of the second half when broken glass was found inside Celtic goalkeeper Joe Hart's penalty area. Hart wasn't struck by anything but referee Willie Collum ordered a full sweep of the box as the second half was delayed. By the end of the match, it was Rangers' title hopes that lay there shattered.
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Both heavyweights traded blows in an exhilarating start, the game crackling into life in the opening 10 minutes. Aaron Ramsey gave Rangers the lead after three minutes before Tom Rogic equalised four minutes later. Cameron Carter-Vickers slammed Celtic in front on 43 minutes and with that, Rangers' two-year unbeaten league run at home went up in a cloud of green and white smoke.
Every Old Firm showdown is an occasion in its own right but Sunday's Ibrox clash was monumental, given the implications. Not since 2010-11 has the league campaign been as close at this stage; the two great rivals separated by just three points ahead of kickoff with seven games to go. To add to the excitement, both sides came into this one on a roll. In the blue corner, the SPFL champions with one defeat in 29. In the Hoops corner, a Celtic side with 21 wins and no defeats in their past 24.
The reigning champions were blown away at Parkhead in February, the game won 3-0 by half-time, but they started like a train here. Ryan Kent ran onto a sublime ball from Calvin Bassey and he slid it to Ramsey, who slammed past Hart to signal delirium at Ibrox. The raucous celebrations hadn't died down by the time Celtic were level. Reo Hatate smacked an effort from the edge of the box and Allan McGregor's parry could only find Rogic, who smashed in to silence the fervent home support.
The equaliser fortified Postecoglou's men, who seized control of the match and almost went ahead 10 minutes before the break when Daizen Maeda burst through. The wily McGregor thwarted him, Rogic was blocked by Connor Goldson and the ball crashed against Bassey as Rangers escaped. Minutes later Maeda went through once again, but same result. McGregor was there, Ibrox held its breath and the home side cleared.
There was no escaping Carter-Vickers, though. As half-time creeped closer, the on-loan Tottenham defender found space inside the area and his left-foot strike was too hot for McGregor, as the ball flashed between his desperate legs.
The second half settled into a pattern quickly; the home side displaying boisterous endeavour and the visitors repelling attacks while playing with the air of calm authority in the face of Rangers' attempts to retrieve a result. Rogic, imperious all day, was withdrawn along with Hatate for Matt O'Riley and Nir Bitton on the hour mark as the game became scrappy, with neither side calm enough in possession.
Hart made then made a big stop from Fashion Sakala to his left as the home fans' cries got even more desperate, and as the sands of time slipped through Rangers' fingers, the small corner in Ibrox housing the 700 travelling faithful began to dream of winning their trophy back.
"Sometimes it's the football that's the decider and we had our moments today, but we had to show real character and courage and determination," Postecoglou said after the match.
"The 700 inside today were outstanding and they played their part and I'm super pleased to send them home happy.
"And I know there are millions at home who are just bouncing around at the moment and I couldn't feel happier for them."