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Place bacon in a medium Dutch oven over medium heat. Cook, stirring occasionally, until crisp and rendered, 10 to 12 minutes. Remove from the heat. Using a slotted spoon, transfer the bacon to a paper towel-lined plate, leaving the bacon drippings in the Dutch oven.
Return the Dutch oven to medium heat. Add the onion, and cook, stirring often, until softened, about 6 minutes. Add the cabbage, 2 tablespoons of water, salt, celery seed, and pepper. Toss well to evenly coat the cabbage. Cover and cook, stirring occasionally, until the cabbage is tender, 8 to 12 minutes.
Remove the cabbage from the heat and stir in the vinegar and bacon. Serve hot.