Celtic was looking to extend its lead at the top of the Scottish Premiership to 17 points, but it was well beaten by Philippe Clements' dominant Rangers, who were without some key players due to injury at Ibrox.
The host side got things going in front of a fervent crowd in the seventh minute, when Ianis Hagi finished a breakaway by firing in from the edge of the area.
Vaclav Cerny saw a deflected effort come off the bar just six minutes later, as Rangers failed to make their dominance count for a second first-half goal.
Indeed, they were nearly undone early in the second half when Kyogo Furuhashi looked to have got Celtic level with an outrageous finish after chesting down a high ball, but it was disallowed for offside.
Cerny again struck the woodwork, this time hitting the post from a tight angle, but Clement's side did eventually get the second goal its play deserved, with Robin Propper sliding home a rebound after Kasper Schmeichel had made a save from a corner in the 66th minute.
Fifteen minutes later, Rangers added further gloss to cap off a brilliant way to start 2025, as substitute Danilo was on hand to turn home with his first touch, just 70 seconds after coming on the pitch.
Prior to this game, Celtic had been unbeaten in its last seven Old Firm derbies, and this was only the Bhoys' second defeat to Rangers in their last 15 meetings.
They were deservedly beaten, with Rangers making them face more shots in this match (24) than in any other in the Scottish Premiership since records began. Rangers finished with 2.17 expected goals, while limiting Celtic to just 0.07 going the other way.
Clement ended his long duck against Celtic, beating it for the first time as Rangers boss in what was his seventh attempt. The only manager to wait as long before winning an Old Firm derby (for either team) is William Wilton, who went winless in his first eight derbies in charge of Gers between 1890 and 1893.
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