Rangers lost ground on Celtic ahead of Saturday's Old Firm clash after Darren McGregor snatched a point for Hibernian with his 86th-minute equaliser at Ibrox.
Steven Gerrard's side were looking to keep the pressure on Brendan Rodgers' Hoops and got the start they were after when Alfredo Morelos fired them ahead with his 20th goal of the season.
The Light Blues failed to build on their lead and paid the price when former Ibrox defender McGregor headed home to make it 1-1 late on.
Gers now trail Celtic - who have a game in hand - by three points going into the second derby battle of the campaign and there was further concern for Gerrard, with Connor Goldson a potential addition to his lengthy injury list after trudging off.
Hibs boss Neil Lennon will be delighted with his side's point but a run of just two wins in the last 12 games means they drop again to eighth.
Gerrard had demanded more of his side's second-half showing that earned Sunday's come-from-behind win at St Johnstone.
Daniel Candeias' fourth-minute mistake was worryingly similar to the kind of stuff his team had produced during their woeful first-period display in Perth though.
The Portuguese wideman was only spared another half-time blast from his manager when Emerson Hyndman headed wide from Martin Boyle's ball in.
The hosts grabbed the lead after 25 minutes as Morelos finally got the better of Adam Bogdan after seeing the Hibs stopper come out on top in the two one-on-one duels they had during last week's Easter Road draw.
Rangers 'keeper Allan McGregor's goal-kick landed at the feet of his Hibs namesake Darren, but the defender fired it straight to Candeias, whose instinctive header sent Morelos scampering through on goal before bundling into the corner of the net.
Bogdan had been the hero in Leith with a string of vital stops but Allan McGregor again showed his importance to Gers, first blocking a Martin Boyle strike before springing up to parry Florian Kamberi's overhead attempt when the Light Blues failed to clear their lines.
A worried hush fell over the ground in the third minute of stoppage time as Goldson had to be helped off the field after crashing to the turf following an aerial joust with Darren McGregor.
The Englishman returned for the second half, albeit moving gingerly. Under no real pressure, he put his first touch into the stand and was relieved to see Kamberi fire just over the crossbar from a cleverly-worked throw-in routine.
Lassana Coulibaly could have given Gers breathing space on the hour mark, but could not keep his header down.
Goldson made way for Nikola Katic moments later and Gerrard will be praying the centre-half does not become his latest casualty ahead of facing Rodgers' men.
The game lacked the pace of last week's Leith stalemate but was no less tense with Gers holding such a slender lead.
Bogdan had to race from his line to smother as Glenn Middleton raced onto a nicely-weighted through-ball from Ryan Jack, whose dipping volley was then pushed away by the Hungarian at full stretch.
And Gers' worst fears came true three minutes from time as Darren McGregor levelled up for Hibs, climbing high to power a header home from Sean Mackie's cross.
Rangers threw on Kyle Lafferty looking for another late winner but Bogdan was impressive again as he pushed away the Northern Irishman's volley.
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