The Scottish champions tasted defeat at Parkhead with an Anthony Stoked penalty not enough after earlier goals from Xhaka and Hrgota
Borussia Monchengladbach gave Celtic a tough test as the Bundesliga side ran out 2-1 victors at Parkhead on Saturday.
The German club - who finished in eighth place last season - dominated much of the friendly and were two goals to the good after 66 minutes through Granit Xhaka and Branimir Hrgota.
Neil Lennon's Celtic side, though, did not just sit back and halved the deficit through a 74th-minute goal from Anthony Stokes.
Lennon included new signings Steven Mouyokolo and Amido Balke in a team that also featured five players under the age of 21 as he evaluated his squad ahead of the new season.
The Scottish Premier League champions had a number of early chances, but they proved fruitless as Xhaka fired home an unstoppable shot from 20 yards after 37 minutes, leaving Lukasz Zaluska with no chance.
Hrgota made an instant impact three minutes after his introduction to double Monchengladbach's lead before Celtic rallied late on.
Stokes sent a free kick over the wall and past Marc-Andre ter Stegen after Joe Ledley was chopped down on the edge of the box, but it proved just a consolation.
The Monchengladbach fixture was Celtic's last pre-season friendly as Lennon's side prepare to face Elfsborg in Uefa Champions League qualifying on Wednesday before the Scottish Premier League season starts next weekend.