The resolution of the temperature sensor is quite too low.

[Hansastro]

Without any special circuitry the temperature resolution of the LM335 is about 0.5 degree with the ADC of the Arduino.
It can be improved with some amplification of the signal.

Example:
The resolution of the actual solution is 0.5°C.
If we limit the temperature range from -20 to +15°C and use a gain of 13 and an offset of -2,5V to the sensor voltage, the resolution become 0.03°C.
For a temperature range from -25 to +35°C, a gain of 7.8 and an offset of -2.4V the resolution is 0.06°C