Key points
Rampant Hearts powered eight points clear of their Glasgow rivals at the top of the Scottish Premiership to bolster their early championship claims and deepen the struggles around the Celtic team.
Alexandros Kyziridis' fine strike and a spot-kick from Shankland gave Derek McInnes' side a 3-1 lead that the title holders could not recover from.
The young defender - one of three youngsters in the Celtic XI - slashed into his own net early on to put the home side ahead at a bouncing Tynecastle, and it was the youngster's infringement that led to the penalty.
A stylish finish from McGregor of the season had swiftly equalized the first goal, and the Swedish attacker almost put Celtic in front, choosing placement over power and allowing the Hearts keeper to make a crucial stop.
But Derek McInnes' irrepressible Hearts regained dominance to consign the visitors to successive league defeats for the first time since last year.
It also gives the Hearts a significant lead at the summit.
The previous occasion they were so far clear was in the 2005-2006 season under George Burley, when they ultimately finished second - one of just four occasions that a team has failed to win the title having held such a lead in the past 27 years.
The Hearts coach, whose former team were second to Celtic on multiple times, has been at pains to play down title talk, as the club seek their first top-flight crown since 1960.
Rodgers has seen it all before at Celtic - both perfect and shaky beginnings to a season. He's yet to finish second best.
But on the weekend's performance, this Hearts team showed they need to be taken seriously.
The Edinburgh side started with the confidence of a side undefeated in the league this season - fans' favourite Kyziridis delivered a ball for the striker to fire off target.
The Glasgow team didn't aid their cause with some unusual sloppiness in possession and they buckled under their first real examination.
Claudio Braga's header was tipped onto the woodwork by the Celtic keeper and Shankland's return ball was diverted goalwards by the hapless defender, in for the injured Cameron Carter-Vickers.
The away side found their rhythm and started stringing passes together. From one such move, Sebastian Tounekti released Tierney to square for McGregor, who rolled in.
Apart from the Nygren chance, the visitors struggled to create much for striker Kenny or his replacement Shin Yamada amid the unavailability of injured forwards their key strikers.
The home team rediscovered their energy and versatility in creating chances in the opposition half. The Greek forward, a standout performer of the club's scouting network, fired a low shot past the goalkeeper from the edge of the box.
Immediately after, Murray tripped the midfielder in the inside right channel and the penalty taker converted. And it could've been an even more handsome win, had replacement Ageu not been stopped by the shot-stopper.
Celtic's second half was somewhat summed up in two incidents involving big-money recruit Engles.
The set-piece from Engles delivery was in sharp opposition to his European display in the continental victory over their Austrian opponents and the Belgium international was then booked for a professional foul.
Hearts head coach Derek McInnes: "You see how hard the players work, the team spirit. That's not sufficient on its own to win games week in, week out.
"What we have got, is good technical ability. You're witnessing it from multiple individuals who have been here previously. Recent additions are keen to demonstrate their quality.
"We're in a positive moment at the minute, but it's just one win. It's crucial for us to maintain this form. We've got loads to do, loads to do. After the first two rounds is typically a benchmark of your standing."
Celtic manager Brendan Rodgers: "It's a really poor goal from our perspective. We failed to push up when the ball went back as a line so when they pass the ball, they ought to be caught offside but didn't. We have got to do better with the attempt.
"There's still so many points to play for. It's still so early. It's only nine games in. Obviously, being eight adrift is not ideal. The positive is there's numerous fixtures to play.
"Our attention must turn on the present and look to find more consistency and more quality in our play."
Celtic are back at home on midweek against newly-promoted Falkirk (19:45 GMT). At the identical hour in the Scottish Premiership, the Edinburgh outfit are at St Mirren.
A seasoned gambling analyst with over a decade of experience in casino gaming and sports betting strategies.