Rangers must beat Celtic on 11 March to have a realistic shot at the Scottish Premiership title, says Alex Rae.
The Ibrox outfit have won six out of seven league games since the winter break and have reduced the gap on leaders Celtic to six points.
But with the champions having a game in hand, Rae insists Rangers require a home win over their Glasgow rivals.
"If they can get a result at Ibrox there's every chance they can put some sort of challenge in," he said.
"We have to be realistic - Celtic have a game in hand at home to Dundee and their form at Parkhead has been excellent.
"They will go into the Old firm game with a lot of confidence, particularly after the second-half performance at Parkhead before the winter break (a 0-0 draw).
"But you have to be realistic - it's still a tall order to overturn the points tally.
"Celtic have a game in hand and are still very much the favourites, but I've been hoping for a challenge at the top end for some time and the fact that it's bubbling away within the media would suggest it's healthy for the game."
The Ibrox side have been resurgent after the winter break, securing eight wins from nine games, including two in the Scottish Cup, with just one defeat, at home to Hibernian.
Former Rangers midfielder Rae believes the club's January signings - including Jamie Murphy and Greg Docherty - have been crucial, along with the form of the likes of Josh Windass, who was on the scoresheet again in the 4-1 win at St Johnstone on Tuesday.
"There's a lot of confidence going round the camp now, the January acquisitions were needed and they seem to have a lot of legs throughout the team as well," Rae added.
"Murphy has been excellent, Alfredo Morelos is continuing to score goals. Windass is in the form of his life - when you consider he got one goal last year and it's 10 in seven games now, that's remarkable.
"They're scoring for fun, they continued that against St Johnstone and will be looking to do that again against Falkirk in the (Scottish) Cup [quarter-final on Sunday, 4 March].
"The mood in the camp is as good as it's been in a long time, and there's optimism among the fans.
"It's remarkable form considering they couldn't string together three or four wins before."
Rae reckons the Ibrox board will be giving "serious" thought to giving manager Graeme Murty the job beyond the summer, having appointed the interim boss until the end of the season.
But he believes Aberdeen will still put up a fight for second spot, despite being six points adrift of Rangers.
"I know (Aberdeen manager) Derek McInnes well enough to know he's a scrapper and they still have a game in hand," Rae added.
"But Rangers are in pole position now and if they continue this form over the next nine or 10 games they can cement second place."