Celtic started season 2006-07 looking to retain the Scottish Premier League trophy and the Scottish League Cup. They also competed in the Scottish Cup, and entered the Champions League at the group stage. Such was the good form of Celtic and the lack of a clear rival in the early stages of the 2006–07 season, that bookmakers Paddy Power paid out on Celtic as the winners of the SPL on 6 November 2006, only 13 games into the season. By mid-November Celtic were 11 points clear of their nearest challengers.

Having qualified automatically for the group stage of the Champions League, Celtic were drawn with Benfica, Copenhagen, and Manchester United. Although Celtic lost their 3 away games, a 100% record at home earned them qualification to the knockout stage for the first time since the group format was introduced in 1992–93. Their opponents in the last 16 were Milan. After both legs of the tie ended 0–0, Celtic's Champions League run was ended by a solitary Milan goal in extra-time by Kaká.

During the January 2007 transfer window Celtic signed Scotland internationals and former Hearts players Steven Pressley and Paul Hartley, full-back Jean-Joël Perrier-Doumbé from Rennes on loan and goalkeeper Mark Brown from Inverness Caledonian Thistle.

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