With Rangers leading 1-0 through James Tavernier’s early goal, Flanagan was shown a yellow card for catching Celtic captain Scott Brown with a raised elbow as they jostled in the penalty area ahead of a 51st minute corner kick.
Lennon was convinced it should have been a 10th red card of the season for Rangers who went on to seal victory through Scott Arfield’s 63rd minute strike.
“It’s a red card - again,” said Lennon. “How the referee has not given that as a red card I don’t know. It’s an elbow into the face. Their bench is shouting, ‘It’s him (Brown) again’ but it’s a clear elbow into his face.
“It’s there in technicolour. Jon has got his hands up first of all. Broony is moving to get away and then he elbows him in the jaw. It’s a straight red card, it’s totally unacceptable and unacceptable for the referee not to give a red card.
“Now I’m not distracting away from the rest of the game where we were second best. But the laws of the game are it’s a red card. You can dress it up anyway you want. You elbow somebody in the face, you’re off. So they’ve got away with one there.”
Lennon’s greatest source of unhappiness was the limp standard of Celtic’s performance as they suffered their first defeat since he stepped in to replace Brendan Rodgers in February.
“We were very poor,” added Lennon. “We lacked energy and desire. We lacked quality. The hungrier team won today and that’s the biggest criticism I can lay at the players’ feet. We looked flat and like we were just fulfilling the fixture today and that’s obviously not good enough.
“I had to tell the players, whether I’m here or not next year, that performance is just not good enough for a derby.”
Kieran Tierney and James Forrest both missed the game because of injury, while Mikael Lustig limped out with a hamstring strain which could rule him out of the Scottish Cup Final against Hearts on 25 May. Forrest is expected to recover in time.
Lennon feels the defeat at Ibrox exposed personnel weaknesses for Celtic who will have to reinforce their first team options this summer.
“There’s a rebuilding job to be done, there’s no question of that and I’ve known that from day one,” he said.
“I think the lack of depth in the squad has been apparent for quite a while now. Again it manifested itself today with a real lack of quality.
“But we’ve still got a cup final to look forward to. Obviously we’re disappointed with the performance today but we know what’s at stake in the next couple of weeks. It’s very important we don’t let anything get in the way from that.”