Martin O'Neill's side had chances to put the game beyond doubt, but were denied by Motherwell's outstanding keeper Gordon Marshall.
And Terry Butcher's side staged an astonishing late rally, with McDonald equalising in the 88th-minute to put Rangers back in the driving seat.
Australian-born striker McDonald, who is a Celtic supporter, then devastated the travelling Bhoys fans by grabbing a second in injury time.
Rangers, who had to wait until the 59th minute to break down Hibernian's stiff defence courtesy of Novo's first league goal since 2 March, held on for victory and had to wait for the full-time whistle to go at Fir Park to confirm the title.
News of Celtic's defeat sparked scenes of jubilation at Easter Road as Rangers rejoiced in recapturing the title in the most dramatic of circumstances.
1554: FULL-TIME Motherwell 2-1 Celtic It is all over at Fir Park and the most unlikely of finishes, with Motherwell stealing the three points and denying Celtic the title in the most dramatic of fashions.
1554: FULL-TIME Aberdeen 2-0 Hearts Aberdeen secure victory in their final game of the season, but they are unable to get the goals to overtake Hibs for the final European spot.
1554: FULL-TIME Hibernian 0-1 Rangers The full-time whistle goes at Easter Road and Rangers must now wait and see if Motherwell can hold on.
1553: GOAL Motherwell 2-1 Celtic The incredible turnaround looks complete as Scott McDonald grabs a second in stoppage time.
1547: GOAL Motherwell 1-1 Celtic Unbelievable scenes at Fir Park as Scott McDonald hooks the ball into the top corner to level matters. Celtic look like throwing away the title in the dying minutes of the season.
1535: Motherwell are pushing for a late equaliser and James Paterson's corner causes havoc, with Neil Lennon forced to make a last-ditch clearance.
1522: Celtic are throwing everything at Motherwell but Gordon Marshall is inspired form in keeping them out.
1516: GOAL Hibernian 0-1 Rangers Rangers give themselves some hope when a shot from Nacho Novo from the right is deflected off Gary Caldwell and into the net.
1512: Craig Bellamy wastes a good chance to give Celtic a two-goal cushion when he is clean through on goal, but his shot is kept out by the palm of Gordon Marshall.
1508: GOAL Aberdeen 2-0 Hearts Aberdeen double their lead through a Derek Adams header. The Dons are closing on Hibs, but they still face an uphill battle to secure the final Uefa Cup spot.
1503: Celtic receive an early let-off as Stephen Craigan's point-blank header is blocked on the line by Didier Agathe's face and the Bhoys eventually clear the ball.
1502: The second half gets under way in the three games.
1452: The half-time whistle goes at Pittodrie, with Aberdeen leading through Richie Byrne's goal just before the break.
1448: GOAL Aberdeen 1-0 Hearts Aberdeen take the lead on the stroke of half-time through Richie Byrne, who headed in a Scott Severin free-kick for his first league goal for the club.
1447: It is half-time at Easter Road and Rangers, who need to win to have any chance of pipping their rivals to the title, are being held 0-0.
1446: The half-time whistle goes at Fir Park. Motherwell have made life difficult for Celtic, but Chris Sutton's goal would be enough to crown them Scottish champions once again.
1430: GOAL Motherwell 0-1 Celtic Chris Sutton puts Celtic in front when he slides in to finish off a rebound after Motherwell keeper Gordon Marshall could only parry Alan Thompson's centre.
1416: Celtic are close to taking the lead when Craig Bellamy hits the outside of the post after linking up well with John Hartson and Chris Sutton.
1411: Nacho Novo strikes a shot against the post for Rangers when Hibs keeper Simon Brown misjudges the bounce of a long ball from Alex Rae.
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