There are lots of reasons for this - a few suggestions:-

1) Thermostat is not opening properly - hence radiator is not effectively
cooling your engine.
Solution - new thermostat - £8 or so.

2) Your viscous fan is not kicking in - you will only notice this if your
car over heats when in traffic as the coupling should lock up when the
engine gets hot. Test this by running your engine to operating temperature
when the car is stationary - DO NOT ALLOW YOUR CAR TO OVERHEAT
SIGNIFICANTLY - the fan should run faster as the coupling "locks up". When
you turn the engine off the fan should stop suddenly and not spin freely -
don't belive the manuals that tell you the fan locks solid - it doesn't, it
merely stiffens up.
Solution - new viscous van coupling - £30 - £40 or so.

3) Coolant system air lock - bleed the system at the top of the thermostat
housing.

4) Blocked radiator - get a new radiator. Don't forget your car is seventeen
years old!!

5) Blown head gasket - your engine will run very badly if water is getting
into the culinders!!

I have owned a few 325is and unfortunately they have a very fragile cylinder
head. Overheating can crack the head leading to coolant in the oil and oil
in the coolant and a very expensive repair bill. look for mayonnaise in the
expansion tank and under the valve cover. I was able to get a re-conditioned
head when it happened to my car for £500 but the whole job cost me very near
to £1000 if you include the new radiator and fan etc and I did the work
myself. My advice - get the car down to BMW and diagnose the problem - NOW!

If the worst has happened and the head has cracked the oil and water mix
will cause overheating in itself; this leads to bearing wear, valve wear,
cam wear and anything else that relies on the oil being in good condition.

I hope it is something simple and not expensive. Good Luck.

 From seeing some of his other posts, I'm not sure he's sure he has a
BMW...