On 10 January 2007, it was announced that former manager Walter Smith was the new manager of Rangers, with Ally McCoist as assistant manager and Kenny McDowall as first-team coach.
The following season Rangers embarked on a UEFA Cup adventure after dropping into the competition from the Champions League. The club progressed to the final, defeating Panathinaikos, Werder Bremen, Sporting Lisbon and Fiorentina along the way. The final was against Zenit St. Petersburg who were managed by former Rangers manager Dick Advocaat. They lost the match 2–0, amid unfortunate disturbances caused by some supporters.
The 2008–09 season saw Rangers make a below-par start to their UEFA Champions League campaign, losing out in the knock-out stage to FBK Kaunas of Lithuania. The financial consequences of the failures to qualify for the Champions League were revealed when the club posted a loss of £3.9m for the six months to December 2008, and in March decided to offer staff the option of voluntary redundancy as a way of cutting costs. Despite a tight title race, on the final day of the league, Rangers managed to claim their 52nd league title. With their title success, Rangers gained automatic entry into the following season's Champions League group stage. Rangers won the Scottish Cup for the 33rd time after defeating Falkirk 1–0 in the final, clinching a double in the process.
At the beginning of the 2009–10 season Rangers had to reduce their squad size by several players due to increasing costs while not having the finances to sign anyone. After a disappointing European campaign where they only picked up two points in the Champions League group stage they made a £1;million profit at the turn of the year. Rangers reached their fifth consecutive domestic cup final where they played St. Mirren in the Scottish League Cup. After having two players sent off in the second half Rangers won the final 1–0 through a goal from Kenny Miller.
On 25 April 2010, Rangers retained their league title with three matches remaining by defeating Hibernian 1–0 with a Kyle Lafferty goal. This was their 53rd Scottish League title. With this success, they again sealed their automatic entry into the 2010–11 Champions League.
During the close season Walter Smith announced the upcoming new season would be his last as manager of Rangers and that the intention was to replace him with Ally McCoist and assistant Kenny McDowall. Smith stated: "I am wholly committed to managing the club next season and when it comes to the end of next season I firmly believe that Ally and Kenny would do a great job and I am glad everybody at the club shares that view."
Rangers were drawn against Bursaspor, Valencia and Manchester United in the group stages of the 2010–11 Champions League. They finished third in the group, behind Manchester United and Valencia.
On 24 February 2011 Rangers reached the last 16 of the Europa League by beating Sporting Clube de Portugal on away goals. Their opponents in the last 16 were PSV Eindhoven who knocked Rangers out of the competition, winning 1–0 on aggregate after a 1–0 win at Ibrox on 17 March. Three days later Smith led Rangers to victory in the League Cup Final over Celtic.
On 6 May 2011 it was confirmed that David Murray had sold his controlling interest in the club (85.3 percent) to Wavetower limited for £1. Wavetower Limited is owned by the company Liberty Capital which in turn is ultimately owned by businessman Craig Whyte, an alleged lifelong supporter of the club.
On 15 May 2011 Rangers secured their third consecutive title by beating Kilmarnock 5–1. The win was Smith's final match in charge of the club.