Keeping garlic in a cool, dark, and dry location works best. The problem with keeping it in the refrigerator is that there is ambient moisture, and this is why your garlic starts sprouting before you use it.

If you happen to live in a humid environment, you may find that your garlic sprouts no matter where you keep it. I find it's always best to buy spices, onions, garlic, and such in small amounts, so you don't have the added worry of it "going bad" before you get a chance to use it.