Inter boss Leonardo admitted the tie was as good as over as he saw his side slump to their second heavy defeat in three days as they flopped again at the most crucial stage of the season.
On Saturday they lost 3-0 to bitter neighbours AC Milan in a top of the table clash that left them trailing their rivals by five points in Serie A.
In both games they had Cristian Chivu sent off but in both games they were already trailing.
In fact, against Schalke they were 4-2 down when the Romanian received his marching orders and Rangnick said that was due to his attacking approach.
"What can I say, that was a fantastic game, there was nothing boring in this game," he said.
"From the first minute we tried to play attacking football. Of course when you play this way you give away chances but we created many, many chances of our own."
Inter actually took the lead with a wonder goal from Dejan Stankovic after just 27 seconds with a volley from the halfway line.
Joel Matip equalised before Diego Milito again gave the hosts the lead only for Edu to restore parity before the break.
But then Raul notched his 70th Champions League goal, Andrea Ranocchia put through his own net and Edu added the cherry on the cake with his second.
"We knew how to respond to this early goal," said Rangnick. "Having seen Inter concede a goal after 47 seconds in the derby I never expected us to concede an even quicker one but the important thing was we managed to respond."
Raul himself said the Royal Blues, as Gelsenkirchen-based Schalke are known, proved they were the better team.
"In the first half, we were almost equals, but in the second-half Schalke reigned," he said mischievously.
"This is an important step, but nothing is definite. Inter are the champions and the return game is not to be taken lightly. For us it was a night of pure joy, not everyone can come to the ground of the title holders and score five goals.”
Leonardo didn't want to give up on the tie but admitted there was scant chance of a comeback in Germany next week.
"We put in a lot of effort to arrive at this point and it's not very realistic to expect a comeback from here. But in football anything can happen," he said.
Although Leonardo has done well with Inter and guided Milan to third place last season, his own record in the most important games is poor.
He has never won a Champions League game at home in six attempts, he has lost all three Milan derbies he's presided over with an aggregate score of 0-9.
In the two most important games of this season within three days of each other, Inter lost 3-0 and 5-2 while last season in the second round of this competition his Milan side were humbled 7-2 on aggregate by Manchester United.
"It's difficult to analyse it, every game has its own story, we've won many other games," he said.