The Hoops knew a victory would move them a point clear of their Old Firm rivals, but Adam Idah missed an early penalty before Hyun-Jun Yang was sent off for a perceived dangerous challenge on Alex Cochrane.
Matt O'Riley's goal was ruled out for offside before Hearts, who also beat Celtic in December, were awarded a spot kick for Tomoki Iwata's handball.
Jorge Grant sent goalkeeper Joe Hart the wrong way and Tynecastle Park burst into life.
Lawrence Shankland smashed in a second for the Jambos after he had an earlier strike disallowed for a tight offside.
After the game, an angry Brendan Rodgers described the match officials as "really, really poor" and hit out at "shocking decision making."
It is the first time since 2018 that Celtic and Rangers have lost on the same weekend as the gap at the top remains two points.
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