French striker Odsonne Edouard opened the scoring in the 27th minute before Morelos was dismissed by referee Bobby Madden for throwing an elbow at Hoops skipper Scott Brown, his fifth red card of the season, albeit the first was rescinded.
Rangers levelled through Ryan Kent in the 63rd minute and when Celtic defender Dedryck Boyata went off injured in the 74th minute after interim manager Neil Lennon had used all three substitutions, the numbers were levelled.
However, in the 85th minute James Forrest drove in the winner to take the champions 13 points clear at the top with seven games remaining.
Gerrard, who confirmed defender Andy Halliday had been shown a second yellow card in an unsavoury post-match melee between the players on the pitch, gave a simple reply when asked if he could still defend Morelos.
“No. Not no more,” he said.
“I have gone above and beyond for Alfredo. I have continued to protect him, support him and love him as a player and the person he is but I have to draw the line under it now and he will be punished internally.
“I will recommend to the board that he is fined a week’s wages and will also recommend that fine should go to the supporters who came today because they are the ones who will suffer from his lack of discipline, also his team-mates as well.
“The money is no use to his team-mates it is more use to the supporters, that’s what I will recommend and we will see what happens from there.”
Gerrard promised a tougher approach to discipline within his squad when asked if Morelos could change his ways.
The former Liverpool and England captain, who was “very disappointed” with the defeat, said: “That’s a question you will have to ask the player himself. I am sitting here hoping, wishing.
“I can honestly say hand on heart I have done everything I can.
“His team-mates have done everything they can, my staff and support staff have done everything they can.
“At the same time, there has been other ill-discipline throughout the team that has hurt us so the rules will change moving forward. I will deal with that.”