For I2C to work there needs to be pull-ups on SDA and SCL somewhere (not one for each device). Typically 4.7k resistors or thereabouts would be used.
Also you need a bi-directional voltage level translator. An example schematic is:
Image credit: Sparkfun: Bi-Directional Logic Level Converter Hookup Guide
This is because I2C devices actively pull SDA and SCL low, however they rely on the pull-up resistors to pull them high. Also this won't work unless the voltage level shifter is bi-directional.
For more information see the Philips Application Note AN97055 - Bi-directional level shifter for I²C-bus and other systems.
If you use the level shifter you need pull-up resistors on both the 3.3V part and the 5V part of the circuit (shown as Rp below).
