Just like he did in the trophy-laden 1990s, Smith dug out a win on enemy soil to the utter delight of the Rangers fans.
It looked unlikely after a first half in which Celtic were the dominant side and missed a hatful of chances.
However, once Rangers took the lead four minutes into the second half they went on to win the game well.
The winner was remarkable. Celtic failed to clear a Charlie Adam corner and Ehiogu become the most unlikely of match winners with an acrobatic overhead kick.
It was a stunning piece of skill which was worthy of winning any game but to do it on his Old Firm debut was remarkable.
The Rangers fans danced and sang long after the final whistle celebrating a win they needed after a disappointing domestic season.
It maintains Rangers’ advantage over Aberdeen in the race for second place with a showdown against the Dons coming up next Saturday.
Smith undoubtedly anticipated a difficult afternoon but he must have been disappointed with the amount of possession and pressure Celtic enjoyed early in the game.
Kenny Miller, Aiden McGeady, Evander Sno and Steven Pressley all had more than decent chances in the first half but fortunately for Rangers none were taken.
Miller could have scored as early as the fourth minute when he fired over the bar after Jan Vennegoor of Hesselink had flicked the ball into his path.
Sno should have done better when McGeady’s cross dropped for him on the edge of the box in 15 minutes but he also missed the target.
McGeady was close with a long range left foot shot and Allan McGregor had to make a smart save from a right foot drive in 32 minutes.
Two minutes earlier Pressley had a free header from a Shunsuke Nakamura but headed wide.
In truth there was little for Rangers to be pleased about at half-time, other than the scoreline.
There were some promising moments down the right side where Alan Hutton overlapped to great effect but there was rarely an end product.
Rangers only had one real opportunity in the first 45 minutes. Hemdani took advantage of Lee Naylor’s poor clearance in 27 minutes and found Filip Sebo with a pass.
The Slovakian turned and hit a left foot shot but it was straight at Artur Boruc.
Smith must have been happy to hear the half-time whistle to give him time to re-organise his players.
Remarkably, he was celebrating a goal just four minutes into the second half from the most unlikely of debutant goal heroes.
Alan Hutton forced a corner right in front of the Rangers fans when McManus slid in to clear.
Charlie Adam swept over the dead ball and it was headed out as far as Davie Weir who headed the ball back into the box.
It came out to Weir again and this time as he headed the ball in Ugo Ehiogu swung his right boot to smash an incredible overhead kick which Boruc touched but could not stop crashing off the bar and into the net.
It was an amazing goal and the Rangers players celebrated like crazy in front of the delirious supporters.
It changed the game completely. Celtic became a subdued force and Rangers looked like a different side.
All of a sudden there was purpose to their play and the Light Blues came close to scoring again in 63 minutes.
Neil Lennon was booked for a foul on Adam and the young Ranger worked a clever free kick which cut Celtic open.
He played a short pass to Ferguson who fed Novo but the Spaniard’s drive was straight at Boruc.
Celtic seemed to have lost their impetus completely and Rangers were superior in most departments.
Davie Weir was a rock at the back and Ferguson began to control the contest.
The best player on the park, however, was Alan Hutton.
The young full back was composed and offered tremendous service down the right side with his tireless running.
Celtic began to leave gaps in the closing stages as they chased an equaliser and if Novo had found better deliveries when released down the right Rangers might have finished more emphatic winners.