Rangers squandered the opportunity to make up ground in the Scottish Premier League title race as Hibernian completed a miserable weekend for the Old Firm.
Goals from Derek Riordan and Garry O'Connor secured the three points, although a Barry Ferguson strike set up a tense finish to the game before he was shown the red card with seconds remaining.
With a question mark still hanging over the future of Alex McLeish, the Rangers manager knew he needed a positive response from his players – instead they added another SPL defeat to their already dismal record.
All the odds had been in favour of Rangers ahead of the game at Easter Road.
Confidence was high following Wednesday night's dramatic Champions League draw against Porto and would have been bolstered further by the news of the shock defeat suffered by SPL leaders Celtic at the hands of struggling Dunfermline yesterday.
Hearts had also dropped points to Motherwell, and Rangers knew they had to take advantage of the opportunity to edge up the table, meaning they had to take all three points from Hibernian, another team above them in the SPL.
Financial restrictions mean the Edinburgh club are nowadays forced to rely largely on youngsters, but they quickly set about showing they can be just as effective as big-name players.
The game was less than a minute old when the home side signalled their intent, Ivan Sproule whipping a dangerous ball into the box, forcing former Hibernian skipper Ian Murray to hook away from the goalmouth.
But, with just 18 minutes gone, the Rangers goal was breached and the Scottish champions were left shellshocked.
Sproule was the dangerman again, displaying superb pace to race into the box and draw goalkeeper Ronald Waterreus to the back post. The Northern Irishman squared to Riordan who stabbed home from a couple of yards.
Rangers made their first change after just 23 minutes, when Alex Rae was replaced by Brahim Hemdani, and the midfielder had yet to touch the ball before Hibernian had doubled their lead two minutes later.
This time Riordan turned provider when he spotted O'Connor unmarked and in plenty of space in front of goal. The big striker left Waterreus no chance with the volley.
Rangers had barely troubled the Hibernian goal but there was a glimmer of hope when Alan Hutton tried to pick out Ross McCormack - the goal hero in Porto – at the near post, but the youngster failed to connect properly and the chance was lost.
Hibernian wasted no time in putting Rangers under pressure again after the break.
O'Connor squared into the path of Riordan but he was caught off balance and his weak effort was easily cleared by the Rangers defence.
Sproule then danced around several Ibrox players before squeezing a shot at goal, which went just inches wide of the upright.
But it was Rangers who found the back of the net instead after 59 minutes. Chris Burke cut the ball back for Ferguson and the Ibrox skipper sent a long-range, low effort past goalkeeper Zbigniew Malkowski.
The Glasgow side should have been back on level terms again a few minutes later but Hamed Namouchi blasted over from six yards when it looked easier to score.
Hibernian were still searching for the goal which would make the game safe for them and it almost came when they were handed a free-kick on the edge of the box but Riordan curled wide.
Sproule then managed to shrug off both Alan Hutton and Sotirios Kyrgiakos before bulleting a shot at goal but the effort was blocked by Waterreus.
Staunch defending meant Rangers headed back to Ibrox empty-handed and their misery was compounded when Ferguson was sent off for a second bookable offence in injury time.
After the game, Rangers manager Alex McLeish reiterated his vow to fight on.
McLeish said: "I don't quit and I am not a quitter. I would love to be able to get to the stage where things here are all rosy in the garden."
