undefined method `source_index' for Gem:Module (NoMethodError)

I'm running a Rails 2.3.5 application and upon running script/server I am shown the following:

./script/../config/../vendor/rails/railties/lib/rails/gem_dependency.rb:21:in `add_frozen_gem_path': undefined method `source_index' for Gem:Module (NoMethodError)
	from ./script/../config/boot.rb:60:in `load_initializer'
	from ./script/../config/boot.rb:44:in `run'
	from ./script/../config/boot.rb:17:in `boot!'
	from ./script/../config/boot.rb:123
	from script/server:2:in `require'
	from script/server:2

If I comment out line 60 in boot.rb (Rails::GemDependency.add_frozen_gem_path) and run script/server, I get this:

=> Booting WEBrick
=> Rails 2.3.5 application starting on http://0.0.0.0:3000
./script/../config/../vendor/rails/railties/lib/rails/gem_dependency.rb:21:in `add_frozen_gem_path': undefined method `source_index' for Gem:Module (NoMethodError)
	from ./script/../config/../vendor/rails/railties/lib/initializer.rb:298:in `add_gem_load_paths'
	from ./script/../config/../vendor/rails/railties/lib/initializer.rb:132:in `process'
	from ./script/../config/../vendor/rails/railties/lib/initializer.rb:113:in `send'
	from ./script/../config/../vendor/rails/railties/lib/initializer.rb:113:in `run'
	from /home/developer/bigpink/config/environment.rb:13
	from /home/developer/bigpink/vendor/rails/activesupport/lib/active_support/dependencies.rb:156:in `require'
	from /home/developer/bigpink/vendor/rails/activesupport/lib/active_support/dependencies.rb:156:in `require'
	from /home/developer/bigpink/vendor/rails/activesupport/lib/active_support/dependencies.rb:521:in `new_constants_in'
	from /home/developer/bigpink/vendor/rails/activesupport/lib/active_support/dependencies.rb:156:in `require'
	from /home/developer/bigpink/vendor/rails/railties/lib/commands/server.rb:84
	from script/server:3:in `require'
	from script/server:3

So, not really sure what to do. Hoping I can get some quick help. Thanks!

I just ran into this problem myself while trying to upgrade an older Rails app from REE 1.8.7 to 1.9.3-p385. Oddly, Ruby 1.9.3-p327 works just fine. What it came down to was ruby-1.9.3-p385 had installed RubyGems version 2.0.2 for me, and 1.9.3-p327 has RubyGems v1.8.23 installed.

Gem.source_index has been deprecated for a while, but since Rails 2.3 is not getting any updates except critical security patches, this will never get fixed. RubyGems v2.0 finally removed that method. Downgrade to any rubygems version prior to 2.0.0, like 1.8.25 to get the functionality back for now. You can get a compatible version using gem update --system 1.8.25.

As a very important aside, Rails 2.3.5 needs to be updated to a minimum of 2.3.17. There are critical security vulnerabilities that open you up to some very nasty attacks. In the long term, upgrading to 3.x needs to be considered a very strong need.

for rvm users,

rvm install rubygems 1.8.2 --force

This helped me: http://djellemah.com/blog/2013/02/27/rails-23-with-ruby-20/

I did this in combination with gem update --system 1.8.25, which might not be needed for your case.

Another way to do this is to install slimgems: gem install slimgems. This is a drop-in fork of RubyGems that works better with old versions.

Update: In addition to the @uxp answer, if you running this command on a Mac running Catalina, there is a small change in command, you need to add -n.

So the command would be sudo gem update --system -n 1.8.25