Substitute Ivan Sproule stunned Ibrox by scoring a hat-trick for Hibernian as Rangers suffered a hangover after their midweek Champions League qualification.
Rangers had struggled to make their dominance of possession count after Zbigniew Malkowski saved superbly from an early Steven Thompson strike.
Dado Prso, Thomas Buffel and Thompson squandered chances for Rangers.
And Sproule made them pay as he lobbed goalkeeper Ronald Waterreus then added two clinical finishes on the break.
Hibs manager Tony Mowbray had left out striker Derek Riordan following the striker's rejection of a transfer to Cardiff.
Thompson made his first start of the season up front for Rangers, with Alex Rae starting in midfield, Peter Lovenkrands being on the bench and Michael Ball missing through injury.
And Thompson made an early impression, forcing Hibs goalkeeper Malkowski into a fine save from a thunderous effort.
Opposite number Ronald Waterreus dealt comfortably with a couple of long-range efforts from Hibs' lone striker, Garry O'Connor.
Nacho Novo screwed an effort just over the crossbar as Rangers continued to be the more dangerous.
A Rae shot cannoned off the body of a defender and fell to the feet of Prso, who only had the goalkeeper to beat, but Malkowski somehow managed to block the shot.
Barry Ferguson sent a drive just over the crossbar after a corner broke into the Rangers captain's path.
Buffel squandered a chance after the break, sending his drive wide from inside the box after being set up by Prso.
Thompson should have opened the scoring when he met a Novo ball and all that was required was a simple tap-in from a yard out, but the striker missed the ball completely.
O'Connor reacted angrily when he was withdrawn from the action to be replaced by Sproule.
But the substitute quickly justified Mowbray's decision by racing past Jose-Karl Pierre-Fanfan to latch on to a long ball from David Murphy and lob the ball into the net over the approaching Waterreus.
Rangers pressed forward and suffered when Scott Brown broke clear on the counter-attack and found Sproule, who finished superbly.
Sproule added a solo effort, holding off Fernando Ricksen before providing a clinical finish.
Rangers: Waterreus, Ricksen, Pierre-Fanfan, Rodriguez, Murray, Buffel (Lovenkrands 55), Alex Rae, Ferguson, Thompson (McCormack 71), Novo, Prso.
Subs Not Used: Klos, Andrews, Malcolm, N'Guessan, Smith.
Hibernian: Malkowski, Whittaker, Hogg, Smith, Murphy, Beuzelin, Stewart, Scott Brown, Thomson (Glass 90), Shiels (Fletcher 73), O'Connor (Sproule 63).
Subs Not Used: Simon Brown, Konte, Morrow, Rudge.
Goals: Sproule 67, 86, 90.
Ref: I Brines